Beta
×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

U.S. Students/Grads Carrying Over $1 Trillion In Debt

Soulskill posted about 8 months ago | from the what-could-possibly-go-wrong dept.

Education 538

An anonymous reader writes "Time reports that American students and grads were carrying $1.08 trillion in student loan debt at the end of 2013. This compares to just $253 billion a decade earlier. Aggregate debt grew 10% in the past year alone. 'By comparison, overall debt grew just 43% in the last decade and 1.6% over the past year.' About 70% of students graduate with some amount of debt, and the average amount owed is $29,400. 'Delinquencies on student loans have risen dramatically over the past decade: 11.5 percent of graduates were at least 90 days late on paying back their loans at the end of 2013, compared with 6.2 percent delinquencies on student loans in 2003. Moreover, the Fed's figures on delinquencies hide more stark data: nearly half of all students with debt aren't currently in repayment thanks to deferments and forbearances and the fact that students are not expected to pay while they're in school.' An attached graph shows an alarming spike in delinquent loans that looks a bit like mortgage delinquencies did at the beginning of the sub-prime crisis."

cancel ×

538 comments

Sorry! There are no comments related to the filter you selected.

Tell me again... (5, Insightful)

PmanAce (1679902) | about 8 months ago | (#46376117)

Tell me again why college in the US costs sooooo much? It's not like you are getting a super special top notch education that is not comparable to top Canadian universities for example.

Re:Tell me again... (2)

the eric conspiracy (20178) | about 8 months ago | (#46376193)

Canada is experiencing similar issues.

http://www.cbc.ca/news/canada/... [www.cbc.ca]

Re:Tell me again... (5, Insightful)

FriendlyLurker (50431) | about 8 months ago | (#46376299)

And Australia, and Spain and... is anyone surprised. Slavery is abolished, Long Live Modern Debt Slavery [wikipedia.org] .

See America’s Education Deficit and the War on Youth [monthlyreview.org]

Re:Tell me again... (1, Insightful)

fredprado (2569351) | about 8 months ago | (#46376381)

Nobody forces you to take a student loan. You can very well skip graduation and start working earlier. Graduation is an investment. If you think it is worth it go for it, otherwise it is not really necessary for a person to live or prosper.

Re:Tell me again... (5, Insightful)

Anonymous Coward | about 8 months ago | (#46376487)

"nobody forces you to take student loan" is a common false choice being pushed on nearly all forums that bring up this enormous problem. If you think it is not a forced choice, you have not been paying attention...

Re:Tell me again... (1)

PmanAce (1679902) | about 8 months ago | (#46376421)

Which is still less than 1/5 of your costs. And?

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376199)

Because in the modern economy, you need a diploma to get a job.

Re: Tell me again... (2, Insightful)

Anonymous Coward | about 8 months ago | (#46376395)

BS. A degree is not required for a job. College is a systematic theft of future wages. There were decent paying jobs that required no degree.

Re: Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376445)

There were decent paying jobs that required no degree.

Indeed, there were. It's just that various fields are so complex and sophisticated these days that you want to hire only properly educated professionals.

Re: Tell me again... (5, Insightful)

Anonymous Coward | about 8 months ago | (#46376591)

Education isn't about "complexity" or "sophistication" required in a job. Having a degree is an indication to the HR of the company you interview with that you're mentally stable enough to put up for long periods of time with a system of arbitrary regulations and useless effort in exchange for very little.

Re: Tell me again... (1)

ganjadude (952775) | about 8 months ago | (#46376605)

There still are. North dakota is having trouble filling high paying jobs as we speak

Re:Tell me again... (0)

E++99 (880734) | about 8 months ago | (#46376611)

You have it completely backwards. Most degrees are worthless to employers. Employable skills are not what is taught in college. If you want a good paying job, you should go to welding school. If you want a pile of debt and to live in you're parents' basement indefinitely, get a philosophy degree.

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376207)

Tell me again why college in the US costs sooooo much? It's not like you are getting a super special top notch education that is not comparable to top Canadian universities for example.

Well, if you're comparing top to top... (facepalm) ...but on average, US universities are generally recognized to be quite good. Why they are not paid for by taxes instead like other countries, that's a complex question, but also not the point.

Re:Tell me again... (4, Insightful)

fredprado (2569351) | about 8 months ago | (#46376401)

Why should people who don't go to college and work earlier and like beasts of burden pay for other people's graduations through taxes. That is ridiculous and it is basically taking money from the poor and giving to the rich.

Re:Tell me again... (1)

jones_supa (887896) | about 8 months ago | (#46376463)

Why should people who don't go to college and work earlier and like beasts of burden pay for other people's graduations through taxes.

To make a better world.

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376519)

Why should people who don't go to college and work earlier and like beasts of burden pay for other people's graduations through taxes.

To make a better world.

As I said, it's a complex question, and not the point here. Unless you plan to overhaul all of US society while you're at it?

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376613)

So you're planning to stop having the poor subsidize the rich when the world is good enough?

Re:Tell me again... (1)

TheRealMindChild (743925) | about 8 months ago | (#46376577)

They don't. I'm can't even fathom how you came up with that conclusion

Re:Tell me again... (4, Interesting)

mc6809e (214243) | about 8 months ago | (#46376211)

Tell me again why college in the US costs sooooo much? It's not like you are getting a super special top notch education that is not comparable to top Canadian universities for example.

The same reason health care costs so much: the more money that's made available, the higher the price that can be asked.

In supply and demand terms, prices rise to balance the supply of education services with the demand for those services until demand is restrained or supply is increases.

What's happened in education and health care tells us that supply isn't keeping up with demand and so we have rationing based on price to match supply with demand. High prices keep some out of school or out of the doctor's office so that the available services match those able to pay for them.

Re:Tell me again... (1)

sjames (1099) | about 8 months ago | (#46376277)

So why isn't supply responding to the glut of money? It's had decades.

Re:Tell me again... (4, Interesting)

Khashishi (775369) | about 8 months ago | (#46376403)

In some ways, it is, with online courses and such. But universities have a very long tradition, and have a guildlike system of prestige and accreditation, so it's very hard to shake them up

Re:Tell me again... (1)

fredprado (2569351) | about 8 months ago | (#46376419)

Mostly because of entry barriers, many of them created by government regulations. It is not as if anybody could just open an University wherever and whenever he pleases.

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376483)

Because the object of top universities is not to only provide education, but also signaling and peering with the elites, and you can't supply that at a community college regardless of how good the professors are.

The job market is highly polarized so when you pay $100.000/year at an ivy league school you are actually paying yourself access to a very select profession. A glut of professionals will not increase the number of stock broker position that are available, rather the number is fixed by market conditions and the firms will select only the "best" ones.

Re:Tell me again... (1)

PmanAce (1679902) | about 8 months ago | (#46376427)

How do community colleges that cost a fraction enter your equation???

Re:Tell me again... (1)

Xicor (2738029) | about 8 months ago | (#46376255)

in most places, it isnt the college that is expensive, but the housing. i pay 3k per semester(which i guess is a little expensive) on tuition... i spend 600 a month on housing.

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376289)

"captive audience"

Re:Tell me again... (5, Insightful)

zippthorne (748122) | about 8 months ago | (#46376439)

Because every time the price goes up some politician has the brilliant idea to either 1) make loans more available or 2) make more "free money" (i.e. grants and subsidies) available.

Since neither of those is "building new colleges" or "training new professors" the existing colleges snap up this money through higher fees. This eventually may result in some increased build-out, but it seems to go slowly enough that they can keep the prices rising faster than inflation.

Worse, one of the ways in which they have "made loans more available" was to legislate that student loan debt cannot be discharged through bankruptcy.

Re:Tell me again... (0)

Anonymous Coward | about 8 months ago | (#46376521)

Since neither of those is "building new colleges" or "training new professors" the existing colleges snap up this money through higher fees.

Horse shit. In my state, the Republican leadership has been gutting support for the state colleges and universities since his election. Guess who pays the difference when higher ed isn't subsidized? When you pull twenty five percent of a state school's funding, don't bitch when tuition goes up. We've got professors on fucking food stamps in places (oh, they love to abuse adjuncts).

Now, what I *will* say is that higher ed management should be flattened by two levels or so around here. We've got associate and assistant deans with masters and doctorates in basket weaving, and half the time as a university grunt (network engineer and systems programmer with a lowly bachelors) nobody can tell me what their exact function is.

Oh yeah, and don't forget our 500k a year football coach.

Re:Tell me again... (3, Insightful)

E++99 (880734) | about 8 months ago | (#46376449)

It costs so much because people have been conditioned to be willing to pay anything for it, believing it is essential for future success. And if they can't afford it the government ensures that they can borrow for it. There's no way tuition can possibly go but up until this scenario changes.

Re:Tell me again... (1)

stabiesoft (733417) | about 8 months ago | (#46376543)

I think much of the increase cost is chaff. I hear TX A&M is planning a 1/2BELLION dollar football stadium. It will be used what 6 times a year? Dorm's used to be cinder block barracks. Now they have luxo condo's. I wonder if the jello salad has been replace with caviar. If the money was spent on education and not fluff, I suspect college would be about as expensive as it was 30 years ago. No one should be surprised though. When real housewives, kim k, and any other number of nobodies are heroes, why should we be surprised that education is now a vacation spa with sports entertainment.

Re:Tell me again... (5, Informative)

cold fjord (826450) | about 8 months ago | (#46376551)

Tell me again why college in the US costs sooooo much?

Colleges need to adapt so that university education doesn't become too expensive for all. [usatoday.com]

. In his book on administrative bloat, The Fall Of The Faculty, Johns Hopkins professor Benjamin Ginsberg reports that although student-faculty ratios fell slightly between 1975 and 2005, from 16-to-1 to 15-to-1, the student-to-administrator ratio fell from 84-to-1 to 68-to-1, and the student-to-professional-staff ratio fell from 50-to-1 to 21-to-1. Ginsberg concludes: "Apparently, when colleges and universities had more money to spend, they chose not to spend it on expanding their instructional resources, i.e. faculty. They chose, instead, to enhance their administrative and staff resources."

And when they had less money to spend, they did the same thing.

Administrator Hiring Drove 28% Boom in Higher-Ed Work Force, Report Says [chronicle.com]

University Administrative Glut Worse Than We Thought [the-americ...terest.com]

Over the last 25 years the number of administrative employees at U.S. colleges and universities more than doubled, according to a joint study by the New England Center of Investigative Reporting and the American Institutes for Research. The ratio of nonacademic positions to faculty positions doubled at both public and private institutions. Overall, the industry has added an average of 87 administrative positions per day, a rate has scarcely slowed since the economic downturn, despite tuition increases. Even more surprising, academic institutions have added more administrative employees despite part-time faculty taking on more teaching duties than full-time professors.

Re:Tell me again... (1)

ganjadude (952775) | about 8 months ago | (#46376601)

its pretty simple really

Colleges have a guarenteed payment from the feds, they dont care if we graduate or not only if we enroll. They have no reason to shrink the costs when they know the gov will pay them whatever they want

Its more complected than just that but thats a good start. when you have the backing of the feds, you will buy the 500$ hammer instead of the 5$ one

Post Bush (0)

Anonymous Coward | about 8 months ago | (#46376119)

After Bush made it impossible to shed student loans through bankruptcy [demos.org] , tuition went up dramatically. Because it could.

Re:Post Bush (5, Insightful)

Anonymous Coward | about 8 months ago | (#46376195)

But in 2005, Congress and the Bush Administration clamped down on bankruptcy filings, placing hurdles in the path of Americans trying to file and making it more difficult to discharge debts. In particular, the 2005 law made private student loan debt, like federal student loans, impossible to discharge in bankruptcy except under a difficult to meet hardship exemption. Today, bankruptcy allows for the discharge of credit card debt and auto loans but not student loan obligations. At the same time, the law permits judges to modify loans used for commercial real estate, vacation homes, and even yachts, but not a family’s primary residence. Two of the largest investments Americans make in order to enter the middle class – in their homes and their educations – are thus excluded from the relief offered to other debtors.

If Evil exists, this is it.

Re:Post Bush (5, Interesting)

tlambert (566799) | about 8 months ago | (#46376443)

But in 2005, Congress and the Bush Administration clamped down on bankruptcy filings, placing hurdles in the path of Americans trying to file and making it more difficult to discharge debts. In particular, the 2005 law made private student loan debt, like federal student loans, impossible to discharge in bankruptcy except under a difficult to meet hardship exemption.

The lead-in for this, which made it possible in the first place, was the 1999 Gramm–Leach–Bliley Act, signed by Bill Clinton, which is what allowed the merger that led to the legislation. This effectively turned credit card debt for students who shouldn't have been offered credit cards in the first place to be non-dischargable by bankruptcy (effectively turning uncollateralized loans into collateralized ones).

http://en.wikipedia.org/wiki/G... [wikipedia.org] –Leach–Bliley_Act

Frankly, there's no difference between the parties; they both work for the banks.

Re:Post Bush (-1)

Anonymous Coward | about 8 months ago | (#46376507)

Just like how the guy who bought the gun is just as culpable as the guy who pulled the trigger.

Re:Post Bush (0)

Anonymous Coward | about 8 months ago | (#46376217)

After Bush made it impossible to shed student loans through bankruptcy [demos.org] , tuition went up dramatically. Because it could.

I think part of the problem is the government will loan tens of thousands of dollars to anyone as long as it is spent on education. No collateral and no plan for how the loan is going to be paid back is required. The current result should have been expected.

If I walk into a bank and try and get a business loan without collateral or any sort of business plan, I'm not getting the money.

Credit cards to the rescue (1)

flyingfsck (986395) | about 8 months ago | (#46376325)

So, pay the student loan with a credit card, then declare bankruptsy... Who said credit cards are bad?

Lessons Learned (1)

Anonymous Coward | about 8 months ago | (#46376127)

So should I stop making payments, in anticipation of looking like I need a government bailout?

-Lodlaiden

Re:Lessons Learned (5, Insightful)

Anonymous Coward | about 8 months ago | (#46376185)

No. It's not the borrowers who get bailouts -- it's the lenders.

Not Surprising (0)

Anonymous Coward | about 8 months ago | (#46376129)

You can thank places like University of Phenix and Devry for this.

Easily available loans (4, Insightful)

Cowclops (630818) | about 8 months ago | (#46376141)

The problem is that anyone can get a loan, even people who definitely have no prospect of paying it back. With guarenteed loan money, schools can charge whatever they want and you'll just have to take out a bigger loan. And of course 18 year olds fresh out of high school don't understand the power of compound interest, they just know that they "have" to go to college to get a good job and they'll get a better job if they go to a fancy private school.

While you can't get a bachelors from our local community college, it only costs $2,500 a year in tuition and you're getting credits that can transfer to any state school. Why can a community college offer actual college classes for that little, but a 4 year school can charge $10,000, $20,000 or more for largely the same education? Its just insane.

Re:Easily available loans (2)

rebelwarlock (1319465) | about 8 months ago | (#46376175)

Serious question here: how do 18 year olds not understand compound interest? I'm pretty sure I understood at least the basic concept by the time I was 12.

Re:Easily available loans (4, Insightful)

holophrastic (221104) | about 8 months ago | (#46376291)

Because their parents don't either. At 12 they might have understood. They forgot by 18. Just look at the number of adults with mortgages for 20+ years. Better yet, ask someone "how much interest are you paying on your mortgage". If you ask me, I'll say $12'000. It's a $450'000 purchase, a $230'000 mortgage, I'll pay an average of 3.5% interest per year, I'll have paid it off in 10 years.

But ask anyone else, and in my position they'll say 3.5%. They forget the "per year" part of that entirely. So they take 20 years, or 30 years, instead of my 10 years, and instead of paying $12'000 total interest on $230'000 total loan, they pay closer to $100'000 total interest, or 40%!

The most frustrating part is that I didn't make it up. Even at the bank, when I applied for or renew my mortgage, they give you the year-by-year breakdown of interest and absolute dollars. All you need to do is to look at the bottom line of the chart. On mine, it says $242'000 repaid. On their, it says $330'000 repaid.

They don't need to understand compound interest, and doing so isn't actually sufficient here. They need to understand the concept of units of measure. In a loan repayment, that unit isn't "percent". As my mother would ask: "percent of what?!". It's "dollars per year". If you understand units of measure, then you understand that dollars per year doesn't tell you how many dollars.

And if you understand marketing, then you understand that smaller bi-weekly doesn't make the dollar amount smaller than normal monthly payments.

Re:Easily available loans (1)

Anonymous Coward | about 8 months ago | (#46376321)

You realize you get to live the house while you pay it off right? You get to live in a $450k house for 10 years, then upgrade to a $900k house after that. If you just took a 20 year mortgage you could live in the $900k house the whole time.

I'm sure you'll say "I don't want or need a $900k house, nobody does", but for some people that's a big part of their quality of life, and having it for an extra 10 years will make their lives significantly better.

Re:Easily available loans (3, Informative)

140Mandak262Jamuna (970587) | about 8 months ago | (#46376355)

No, the GP is not talking about upgrades at all. He (or she) is saying think in terms of total repayment, not percentage, not yearly payments, not monthly payments. That point is valid whatever the size of home you want to buy or upgrade.

Re:Easily available loans (2)

holophrastic (221104) | about 8 months ago | (#46376473)

Actually, you are totally and completely incorrect, you don't get to upgrade from a 450 house to a 900 house after 10 years. That's the major big huge mis-information spread to you and to everyone. In order to do what you've said, you'd need a time-travel machine.

After the 10 years, your house isn't worth 450, it's worth 900 -- and so is the next house you buy.

So, in 2024, my 2014-450 house is a 2024-900 house. The second house that I buy in 2024 is another 2024-900 house, which was a 2014-450 house.

Unless you "down-size", you're never affording anything more. It's just a bigger number because everything's a bigger number. You need to sell your house and not buy a new house in order to benefit from the appreciation at all.

Welcome to marketing: they tell you that you're smart, so you don't realize that you're stupid.

Ultimately, the benefit to your mortgage is that you're investing in real-estate that appreciates. If your $450'000 house appreciates to $900'000, and you spent $150'000 in interest, then you got a 67% return on your investment over ten years. That's a pretty shitty return for a long-term investment. You could have invested in many things that would give you a much better return, and much more reliably too. But none of that matters because you're about to buy another house the day you sell, so all of this only applies to an investment property, not to your own home.

But look at this. In a thread about not understanding how mortgages, interest, and compound interest relate to actual dollars, you're a text-book anonymous example.

Re:Easily available loans (1)

Anonymous Coward | about 8 months ago | (#46376413)

You have to factor in the cost of money... 3.5% is dirt cheap. Can usually make way more than that in the stock market. Or using the money to start your own business. Sure, you may pay 3.5% interest per year for 20 extra years, but if you are making 10% in the market on that money it is a net win.

Re:Easily available loans (1)

holophrastic (221104) | about 8 months ago | (#46376489)

That's got nothing to do with the mortgage. The fact that you can compensate elsewhere is always true. By that logic, if I have a super-successful stock or business opportunity, then I can pay 90% interest on my mortgage too.

Re:Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376553)

It has everything to do with your mortgage.

The mortgage lender is willing to give you cash at 3.5%. Suppose you can invest the cash at 8%. In that case, you would be very stupid indeed to turn down this offer, as I'm sure you'd agree. But you would also be stupid to insist on limiting the term of the repayment to 10 years, when you could make it 30 years instead. That way, you'd have the money to invest at 8% for much longer.

Re:Easily available loans (3, Insightful)

Anonymous Coward | about 8 months ago | (#46376431)

Just look at the number of adults with mortgages for 20+ years.

That is simply wrong.

1. If I lived in the US, I would have taken out the 30-year fixed-rate mortgage up to last year.
2. sometimes you have to understand the other interest rate, inflation.

How can you not take out a 4% mortgage where historical spikes of inflation are much above that? Unless you are betting that inflation will be kept in check for 30 years!

Re:Easily available loans (1)

holophrastic (221104) | about 8 months ago | (#46376517)

I like that you think interest rates will never go down over thirty years. Keep up that gud thunking.

Here's a tip. You're confusing "interest rates" and "inflation". They are tied together in causation, but their values are not tied at all.

Re:Easily available loans (1)

holophrastic (221104) | about 8 months ago | (#46376539)

Also, why in hell would I want to pay 4% today? I've beet paying 2.5% for the last 6 years. Right now, I'm paying 2.24%. If I were paying 4%, I'd be burning $2'500 per year, compounded! And because I'm paying down large chunks every year, now is the time that I really want to pay a lower rate. Later, when my mortgage is much much smaller, the rate matters less.

So again, welcome to compound interest. I'm paying a low rate on my currently high mortage. Later I'll be paying a high rate on a low mortgage. That's cool. But you, on the other hand, right now are paying a high rate on a high mortgage and later you'll be paying a low rate on a low mortgage.

Do the math. Get it down to actual dollars out of your wallet. You're wasting boat-loads of money. All you're getting for it is peace of mind that things won't change over 30 years. That's easy when you screw yourself today.

Re:Easily available loans (5, Insightful)

Anonymous Coward | about 8 months ago | (#46376481)

Because their parents don't either. At 12 they might have understood. They forgot by 18. Just look at the number of adults with mortgages for 20+ years. Better yet, ask someone "how much interest are you paying on your mortgage". If you ask me, I'll say $12'000. It's a $450'000 purchase, a $230'000 mortgage, I'll pay an average of 3.5% interest per year, I'll have paid it off in 10 years.

But ask anyone else, and in my position they'll say 3.5%. They forget the "per year" part of that entirely. So they take 20 years, or 30 years, instead of my 10 years, and instead of paying $12'000 total interest on $230'000 total loan, they pay closer to $100'000 total interest, or 40%!

I don't think you understand this as well as you think you do. The person who gets a 30-year loan at a 3.5% rate is almost certainly doing much better than you, despite having to pay more total interest.

Let's look at some numbers. Your plan requires a monthly payment of $2274 every month for 10 years. Their plan requires a monthly payment of $1033 every month for 30 years. If they put the $1241 per month saved into an investment that gives 4% NOMINAL returns per year (which is quite a low rate of return historically speaking), then after 10 years, here is how their finances compare to yours:

You: No mortgage, no additional assets
Them: A debt of $178,082 and an investment worth $185,947.

As you can see, if they then pay off the principal, they end up almost $9000 ahead of you. If you factor in inflation, or assume annual returns better than 4%, the situation swings even further in favor of the 30-year mortgage. For example, using the 9.5% historical annual returns of the S&P 500, the person with the 30 year mortgage ends up $54,000 ahead of you after 10 years.

Note: In reality, banks charge a higher rate for the 30-year mortgage for exactly this reason.

Re:Easily available loans (-1)

holophrastic (221104) | about 8 months ago | (#46376615)

you've presumed, incorrectly, one VERY major thing: that I don't borrow against the equity in my home. You've added an investment on their side, but not on mine. Do the exact same calculation again, but this time have me borrow from my own home equity.

That $9'000 isn't a mystery. It's very simply 4.0% - 3.5%. The fact that you chose that nominal investment at 4% was arbitrary. It could have 24% and the number would be bigger.

So give me the same investment. As I pay down my mortgage, use the built-up equity to invest in that same nominal investment. Because I'm paying down my mortgage much faster, I'm building up my equity much faster, so I'm investing into that nominal investment much more.

The point is that I can always hedge my bets and invest in more stuff. I can play one investment against another as long as I like. But the more interest I pay on loans, the less I have to invest.

Re:Easily available loans (1)

sjames (1099) | about 8 months ago | (#46376317)

It's one thing to intellectually understand it, quite another to have a feel for it.

Especially when confounded with deferred payments (but not necessarily interest) and having the value of the degree pounded into their heads since they were old enough to stand without assistance.

Re: Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376333)

My family and I didn't understand just how much my college loans would cost per month upon graduation. Otherwise I would have gone to community college. College was just something I HAD to do. I never knew a loan company would charge 10% on 10k and 20k. I think a lot of families are in the same boat.

Re:Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376339)

Serious question here: how do 18 year olds not understand compound interest?

They do (for the most part). But they have been told their entire life that to be successful you need a college education. Their parents push it, teachers push it, guidance counselors push it. The news pushes it, politicians push it, and eventually their own friends push it.

They go to college assuming that it will result in a well paying job when they graduate. They are not prepared for the reality: there are not enough jobs to go around. A college degree in Fine Arts will not get you a well paying job.

College used to serve a purpose: In the 1960s, only about 5% of the (US) population obtained a bachelors degree. This served as an effective hiring filter, bachelors degree = top 5%. Now about 35% of the population has a bachelors degree, highly diluting the value. On top of that, a vast amount of those degrees are in generic fields of study, many colleges have lowered their standards and become "degree mills", and the students themselves come out of college without learning the value of hard work.

Re:Easily available loans (1)

Anonymous Coward | about 8 months ago | (#46376183)

Why can a community college offer actual college classes for that little, but a 4 year school can charge $10,000, $20,000 or more for largely the same education?

Because it's not the same education.

Besides 4 year schools are not the causing this problem. It's for profit schools are that the problem. It's places like University of Phoenix and Devry that are solely responsible.

http://www.pbs.org/wgbh/pages/frontline/collegeinc/view/

Re: Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376341)

You don't think state schools collecting $100,000 in borrowed money and giving degrees in women's studies is part of the problem?

Re: Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376349)

No because "state schools collecting $100,000 in borrowed money and giving degrees in women's studies" are 100% fictional.

Re:Easily available loans (2)

russotto (537200) | about 8 months ago | (#46376477)

Besides 4 year schools are not the causing this problem. It's for profit schools are that the problem. It's places like University of Phoenix and Devry that are solely responsible.

Certainly not. The for-profit schools are a response to the free money available, and part of the problem. But the cause isn't the schools, it's the free money. Even if you made all the for-profit schools go away, the problem would be the same size, just the price of the traditional schools would go up even more.

Re:Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376495)

100% wrong.

Re:Easily available loans (1)

purpledinoz (573045) | about 8 months ago | (#46376221)

The worst part is that these loans cannot be discharged, even if you go bankrupt. In a way, I guess it makes sense. Once you finish university, you could just go bankrupt and have a free education. However, if you're stuck working low-wage jobs the rest of your life, you will never get rid of this debt.

Re:Easily available loans (2)

DarkOx (621550) | about 8 months ago | (#46376377)

You are right but the structural reason for that otherwise the loans would be totally unsecured; no collateral is put up and you can't repo and education for non payment.

Because most high school grands looking for college loans don't have anything of sufficient value to put up the loans must be unsecured in order to get lenders to the table they had to be given special rights that trump bankruptcy protections.

Re:Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376231)

And of course 18 year olds fresh out of high school don't understand the power of compound interest,

Even those that do -- compound interest is impressive over decades, and in college you're doing something that makes a big change in just a few years. It's a gamble that nobody is quite sure of. And to be honest, when you start talking of decades -- a lot of my classmates in university didn't think they were going to live that long.

Re:Easily available loans (4, Insightful)

DarkOx (621550) | about 8 months ago | (#46376281)

Why can a community college offer actual college classes for that little, but a 4 year school can charge $10,000, $20,000 or more for largely the same education? Its just insane.

I agree with most of what you have to say, and its borne out by the massive increase in the price of undergraduate educate over the rate of inflation, during the last 40 years as more and more loan subsidies and grants have been created.

That said to some degree the community colleges can afford to what they do because the other schools exist. Lots of community college staff is part time, there academic involvement begins and ends with teaching. They are not creating the texts and such that get used. Professors at more traditional institutions usually also do things like conduct studies, author texts or articles etc. Some (although very little of) of the higher prices at the traditional schools goes to subsidize the costs of these other academic efforts, without which there would be little to talk about in the CC class room.

Not to say that Community College is not a really great option for lots of people, or that its role is not important or even that it should not be expanded.

Re:Easily available loans (0)

Anonymous Coward | about 8 months ago | (#46376313)

The problem is that anyone can get a loan, even people who definitely have no prospect of paying it back. With guarenteed loan money, schools can charge whatever they want and you'll just have to take out a bigger loan. And of course 18 year olds fresh out of high school don't understand the power of compound interest, they just know that they "have" to go to college to get a good job and they'll get a better job if they go to a fancy private school.

While you can't get a bachelors from our local community college, it only costs $2,500 a year in tuition and you're getting credits that can transfer to any state school. Why can a community college offer actual college classes for that little, but a 4 year school can charge $10,000, $20,000 or more for largely the same education? Its just insane.

The reason most people don't take community college courses is because you're already done with those by high school. Your first semester in college is stuff like differential equations, linear algebra, algorithms, etc. Community college is just what everyone does in AP courses these days, or they do it in high school. If you want more people to take community college courses, they need to offer at least the middle division courses.

Re:Easily available loans (3, Interesting)

Trepidity (597) | about 8 months ago | (#46376361)

Mixture of things:

1. In many states, the community-college system is still heavily subsidized, while the flagship schools have been moving towards a "user-pays" model. For example, the state of California has cut its per-student subsidy to the University of California system by about 60% in real terms over the past 30 years, but has cut their per-student subsidy to the community-college system by only about 20%.

2. Community colleges typically are looser in who they'll hire to teach classes: no PhD required, can teach part-time, no research expectations, etc. Like with any field, if you have lower requirements, you can get staff for lower salaries, e.g. hiring C++ programmers vs. web designers.

3. Prestigious universities have suffered more administrative bloat, I guess because it's where the prestige is, so attracts empire-builders. Community colleges don't pay their President $500k/yr, or have an army of Assistant Vice Chancellors.

4. To be a "top school" there are higher expectations of the other resources provided besides the actual classes. A community college typically has a small or no library, while UC Berkeley is expected to have a full-coverage research library. UC Berkeley is also expected to provide good laboratory and computing facilities, dorms, security and healthcare for an on-campus resident population, etc.

Re:Easily available loans (2, Interesting)

Anonymous Coward | about 8 months ago | (#46376369)

While you can't get a bachelors from our local community college, it only costs $2,500 a year in tuition and you're getting credits that can transfer to any state school.

not necessarily. I did that and some of my classes weren't transferable because there wasn't a compatible class at the state uni. -at that time. Also, there's a minimum grade ( usually) for transfer - 'C'. A 'D' will allow you to get your associates if your average stays above a certain level, but it won't transfer.

The problem is that anyone can get a loan, even people who definitely have no prospect of paying it back.

What I advise kids these days is that unless you're going for CS or Engineering (or medicine) AND you think you can keep your grades above 3.0, then don't bother with loans at all. Find some other way.

We are brought up that education is always a good investment. And the more the better. Many of us took loans to get graduate degrees (MBA, JD, MS) during the bust because we were under the erroneous impression that the extra degree would improve our employment prospects or allow for a career change.

I was told by a hiring manager that my graduate work shows him that I went to school because I couldn't get a job (the economy sucked!) and that if I were any good, then I wouldn't be unemployed.

Ouch. $48,000 debt (from a state school) Ouch! I blew through my savings while I was out of work - this was before there were decent unemployment. And even then, if you're unemployed - especially long term - you become unemployable. Career change can't happen either because no one hires entry level people anymore. Entry level is now 2 years of experience and with gray hair, it's even harder.

So, what we need to do is get over this 'more education is better', and if we as a society want folks are are educated in humanities, then those programs need to cost MUCH less.

But the thing is, just about every profession is hurting. (A 3%ish unemployment rate for software developers is HORRIBLE! if there was a shortage, it should be MUCH less - even with the national average being above 7%. ). New college grads are having a hard time in every field - some worse than others. And this student debt is going to be a drag on the economy for decades.

My car is falling apart ad I can't afford a new one and it's already 19 years old.

That's a car sale and financing that won't happen because I'm paying for a worthless degree.

Re:Easily available loans (1)

Anonymous Coward | about 8 months ago | (#46376375)

It's not even close to the same education or experience. More money brings in more successful educators, which may be more likely to teach well.
Have you taken any classes at your community college? No one gives a shit about anything there. It's just an extension of public high school.

This all beside the point, because the $2500 a year in tuition is STILL HIDEOUSLY BLOATED. There is absolutely no good reason school should cost this much money.

Comparison to mortgage market (0)

Anonymous Coward | about 8 months ago | (#46376143)

One piece of good news is that the total amount of mortgage debt is 13 trillion dollars, which is quite a lot larger than the amount of student debt. So when the inevitable student loan financial panic arrives, it will probably not be as big as the subprime mortgage crisis.

Finland (3, Informative)

jones_supa (887896) | about 8 months ago | (#46376151)

In Finland, the government-backed student loan is tied to the student benefit, which you in turn get only for the typical length of the studies for that degree, so in practice you can only draw about €10,000 at maximum for a single 4-year degree. If your studies take longer than that, you have to pony up the extra money by yourself.

Re:Finland (4, Informative)

jones_supa (887896) | about 8 months ago | (#46376169)

Addition: during that time you are also allowed to get a free social security benefit of paying your rent.

Not surprising (1)

Anonymous Coward | about 8 months ago | (#46376153)

You can thank places like University of Phoenix and Devry [pbs.org] for this.

Well worth it (0)

Anonymous Coward | about 8 months ago | (#46376157)

Just think of all the amazing college football stadiums that have been built with that trillion dollars. I think it is well worth it. College isn't about education anymore, but rather think of them as world class sports orginizations.

Re:Well worth it (0)

Anonymous Coward | about 8 months ago | (#46376223)

No college stadium has been build out of tuition money. The budgets are completely separate.

How does the crash play out? (0)

Anonymous Coward | about 8 months ago | (#46376179)

Student loans aren't dischargeable in bankruptcy, the only way out from under them is to die. So how would a crash work in this sector? Are these loans being collateralized? Is there going to be a 2008 moment? I doubt it. This will just be an ongoing drag on the economy.

Re:How does the crash play out? (1)

flyingfsck (986395) | about 8 months ago | (#46376365)

Pay the loan with a credit card, wait 3 years, then declare bankruptsy. It doesn't take much genius to figure that out.

What a joke (2, Informative)

zakkudo (2638939) | about 8 months ago | (#46376229)

I delt with the delinquencies department when I was stuck living in the middle of the countryside with my mother, a fake leg and depression and no self confidence. They threatened me at home until I moved into a gay friend (uncomfortable sometimes) in another city where I started work I couldn't physically in retail. When my fake leg broke, they more or less said it was my fault for taking the only work that was around and for being handicapped. I should have died from cancer when I was 12 at that rate. I was close to hanging myself in Seattle in front of a bunch of children to protect them from a similar fate because of them.

The department of education cares for no-one. They are only full of threats. The kind where if you tell a person in a wheelchair every day, they will eventually kill themselves.

Re:What a joke (1)

zakkudo (2638939) | about 8 months ago | (#46376273)

What amazed me the most by them was how they went out of their way to make sure they had no documentation that I was handicapped. Despite all of my letters and my phone calls. All so they wouldn't have any liability. It amazed me how the department of education automatically blocks all calls if you are delinquent. I amazes me how they can say they don't owe any of my 100k medical bills because of their threats into work I couldn't do, that eventually forced me homeless.

Re: What a joke (1)

Anonymous Coward | about 8 months ago | (#46376319)

Why would the Department of Education owe you for your medical bills?

Re:What a joke (1)

Anonymous Coward | about 8 months ago | (#46376467)

You moved into a gay friend? That is a really close friendship!

3 days of fucking nightmare (0, Troll)

Anonymous Coward | about 8 months ago | (#46376235)

I had to go through the Slashdot questionnaire to work out how to restore Slashdot classic. It was awful! Imagine having your normal web browser work like a mobile web browser. It was all of 5 words per screen! Traumatic.

The Bubble Behind the Mortgage Bubble (4, Interesting)

retroworks (652802) | about 8 months ago | (#46376267)

My theory: This "student loan bubble" is actually the bubble that caused the mortgage bubble. For the past 30 years, college loan professionals have been convincing 18 year olds that 5-digit debt is ok. We were "broken" (as in horse context) by the time we borrowed for our first car, our eyes glazed when buying our first house. We were trained to be numb by rationalizations worthy of drug pushers. The first thing a young person does at 18 is sabotage any hope of compound interest savings accounts, as every penny that would have been put away is spent on compounding interest in the wrong direction.

Ok, my college experience turned out ok. But I circumvented work-study and doubled my working hours (food service). If you DO borrow to go to college, it may turn out ok, but be sure to work in a few economics and accounting classes.

That debt is solid gold! (4, Informative)

140Mandak262Jamuna (970587) | about 8 months ago | (#46376271)

It can't be discharged by any bankruptcy proceedings. You are hooked for life once you take a loan in this form. We abolished debtors prisons sometime around 1800s, then indentured labor then fought a civil war to end slavery. Then created a debt that can survive even bankruptcy chaining the earnings of someone for life!

Re:That debt is solid gold! (0)

Anonymous Coward | about 8 months ago | (#46376547)

It can't be discharged to keep the interest on it low. If you could just max out the loan, get a degree and then default, there would be no market for loans in the first place because there is nothing to repossess.

As for the debtors prisons - you won't go to jail for the default on your student loan, but god forbid you lose your job and can't afford the child support - you get slammed with the contempt of court and the pound-in-the-ass prison awaits you.

Where all that money went (5, Interesting)

Boawk (525582) | about 8 months ago | (#46376293)

The government has essentially taken over the academic loan business in order to make funds more readily available to a greater number of people seeking a college degree. The result of this easy money? Not only this debt crisis but also college tuition and fees inflated at four times the rate of cost-of-living inflation [wikipedia.org] . Way to go government intervention!

Re:Where all that money went (1)

fche (36607) | about 8 months ago | (#46376323)

You might be assuming that this is an unintended consequence.

Why could it not be lassoing in the next generation of statist voters by offering them loan forgiveness (paid of course by taxpayers).

Re:Where all that money went (0)

Anonymous Coward | about 8 months ago | (#46376561)

With the annual deficit as high as it is, it's not as if taxpayers are really "paying" for it, is it?

Not Expected? (0)

Anonymous Coward | about 8 months ago | (#46376305)

the fact that students are not expected to pay while they're in school

Surely they can agree with the lender to at least reduce the interests, or even reduce the original loan, if they have the means? It shouldn't be a bank's best interest to push their clients into avoidable difficulties. People talk and long term clients switch banks.

Cap the amount of the loans (3, Informative)

the eric conspiracy (20178) | about 8 months ago | (#46376307)

About 10% of the debtors owe more than $40,000. There is no reason to take on that much debt unless you are going to medical school.

Re:Cap the amount of the loans (0)

Anonymous Coward | about 8 months ago | (#46376411)

hahahahahaaha med school is $200k-$300k $40K barely covers night school at a private college while you work full time, because the state school doesn't want to have working adult students come in at night 4 x a week.

Need to drop the college for all idea and have mor (2)

Joe_Dragon (2206452) | about 8 months ago | (#46376311)

Need to drop the college for all idea and replace it with more trades / tech schools / apprenticeship and get rid of the 4+ year idea as well.

Re:Need to drop the college for all idea and have (0)

Anonymous Coward | about 8 months ago | (#46376563)

Need to drop the college for all idea and replace it with more trades / tech schools / apprenticeship and get rid of the 4+ year idea as well.

... and we have a winner. And I say this as the holder of a four year degree. My military apprenticeship and schooling (a year of component level electronic systems repair training and supervision for the first year or so) and technical associate's degree (I.T.) has done more for me than my bachelors ever will.

You are not wanted to join the upper class (0)

Anonymous Coward | about 8 months ago | (#46376351)

This is clear proof that the banking class is responding to the common man's insistence on opportunity by selling him a deficient education for a price bloated by manipulation. If you want a chance to move up, they'll give it to you, but you have to sell yourself to the banks first.

Time to declare open season on Wall St?

Lesson learned.... (1)

Anonymous Coward | about 8 months ago | (#46376453)

330k in loan debt right here. Busted my but to get out of college near debt free, then medical school costed near 250k before obscene amounts of interest. IBR and privates total 2200 a month.... That's a house.

This bubble can't pop, as there is no way to discharge the loans. I did something I think was fairly smart. Joined the military. 10 years and loans are gone. Then life starts over. Hoping we start a new war somewhere so I can deploy and get some tax free income to speed up the payback.

One thing I will continue to impress upon my son is how toxic debt and specifically student loans are. My friends and I used to joke about how much our brains were worth as we racked up 6 figures in debt. Then you realize it's all a crock when your in debt prison. Moral of the story, get in and done with your education as fast and cheap as possible.

The same root cause (1, Interesting)

Anonymous Coward | about 8 months ago | (#46376455)

As much as people try to explain it away all of the economic problems we are seeing in the news have the same root cause: Money is simply a stand-in representation for resources so it can be shared amongst the populace. If the amount of resources stays roughly the same (which it does) but the population grows exponentially then there is simply fewer resources to go around as time progresses.

Yes -- we may occasionally stumble on a more efficient use of resources but fundamentally the earth is a pretty closed system. While there is a small minority of people who go to school in the genuine quest for knowledge and understanding the vast majority are doing so for a realistic gain in the future: a better job. And why do people want a better job? More money. More resources. It boils down to our basic physical needs: to eat, to reproduce, etc. These needs drive people to consume resources and there are more people and the same amount of resources. Expect the future to look more and more dystopian unless some major changes happen.

People who focus on the current upswing of the stock market and certain limited segments of the economy are completely missing the point: The long term trend is progressing in a pretty clear direction. There is also some snowball effect. Most of the improvements of modern life were made in part because people were well educated and didn't have to worry every day about survival. That's how our civilization formed, after all: a food surplus drove civilization. Expect the intellectual output of the human race to suffer greatly when smart people are occupied with how they are going to eat today and not busy creating the future. If drastic action isn't taken (globally) our population climb is going to have a very, very predictable outcome and it will take a great deal of time for civilization to repair itself -- if it does.

Saw this one a mile off (2)

paiute (550198) | about 8 months ago | (#46376479)

Once the fluid pool of global investment money was throttled back from the slimy mortgage market, they were bound to look at student loans. Everyone can get them, they are not dischargable in bankruptcy, they are increasing every year, the interest rate is way higher than the mortgage rate. This will be the next source of a financial meltdown.

The next bubble (1)

Anonymous Coward | about 8 months ago | (#46376523)

You've heard it before, but this is inevitably the next financial bubble. You take a kid with no earning potential, saddle him with a lifetime of debt so that he can GAIN some earning potential, then move the goalposts that his earning potential doesn't earn anything, but demand that debt be paid... something MUST give somewhere.

Alienating an entire generation of well-educated kids has not worked out well in the past.

Load More Comments
Slashdot Login

Need an Account?

Forgot your password?