The Looming Student Debt Crisis

[hobbsyoyo]

When and how are we going to deal with it?

Or are we still blaming entitled millennials for it?

 

[rah]

Yes, plenty of blame.

But don't worry, the Dems will promise to forgive that debt to win in 2020. Problem solved.

 

[hobbsyoyo]

Would that be a problem for you?

 

[Farm Boy]

It wouldn't be for me, yet somehow I get the impression that the ones I'll still be paying on, the ones that absolutely have monopolized my accessible cashflow for my entire married life, will somehow magically not be the right type to be forgiven, or be too old, or be too young, and thanks for paying ahead on a couple of them so you'd have breathing room for a kid during the last half of the decade, but you're not getting that back stoooopid. Then all the bastard kids will be buying out the houses in the market that I still can't afford!

 

[warpus]

Hasn't this been a crisis for some time now?

It shouldn't be normal to graduate with $200,000 in debt. That's just. insane.

 

[hobbsyoyo]

It wouldn't be for me, yet somehow I get the impression that the ones I'll still be paying on, the ones that absolutely have monopolized my accessible cashflow for my entire married life, will somehow magically not be the right type to be forgiven, or be too old, or be too young, and thanks for paying ahead on a couple of them so you'd have breathing room for a kid during the last half of the decade, but you're not getting that back stoooopid. Then all the bastard kids will be buying out the houses in the market that I still can't afford!

This is something I worry about. The government will have to make a buyout fair and that likely means going all-in and forgiving or buying out everyone's debt. It would be a major political fight but people our age are the largest voting bloc. We could win that fight if we wanted to.

And I feel your pain. With my debt burden I cannot afford a house and couldn't afford a child without major life style sacrifices. Granted, life style changes come with having a child but I don't want to feel financially insecure in having one.

Sure, the particular lines they may draw will exclude some people but hopefully those will truly be edge-cases or people just trying to defraud the government (as will happen if such a scheme went forward).

Hasn't this been a crisis for some time now?

It shouldn't be normal to graduate with $200,000 in debt. That's just. insane.

To be fair, I don't think people graduate with $200,000 in debt without becoming doctors or other PhD's. That's still an insane amount of money. I think about $30,000 is probably typical, maybe a bit less. But even if that's an average, that still leaves millions of students saddled with more.

That's a house down-payment or savings for a kid. It used to be a kid's college fund worth of money but LOL.

 

[rah]

Yeah. I'm not sure who came up with this prank on the younger generation.
[old man rant] when I went to college, it was one of the top engineering colleges in the country and my first semester tuition was 450.00 dollars [/old man rant]

Even assuming a 10 fold increase over time that would be only 4,500 in today's dollars. For a stellar education.

 

[Perfection]

Or are we still blaming entitled millennials for it?

Yup gotta wait it out until boomer percentage drops

 

[rah]

Why, they're still going to blame everything on them. It's easier.

 

[hobbsyoyo]

To answer Warpus' first question -

To answer your first question - this has been a very slow moving problem that has only escalated to crisis levels in the last decade. State spending for colleges fell off a cliff during the recession which simultaneously saw through-the-roof-demand (due to the recession). This created a massive sellers market that drove up prices as schools compensated for lost state funding and rushed to build lots of new, unnecessary collegiate infrastructure (stadiums, rec rooms, gyms, etc).

Or they just rose rates to keep up with the jones'. The way our federal aid programs are set up, they actively encourage colleges to drive up cost.

Say a college costs X
Say a student qualifies for Y in aid money
If X < Y, the student takes out Z in loans
The next year, the state decides to give Y+1 so students don't have to take out loans
So the school says, ok, tuition is now Z+1 because we know we're getting Y+1 in aid money and the student can still take out Z in loans like they did last year.

It's a perverse cycle because there are next to no price controls and the government is actively distorting the market. Not to mention that unlike all other debt, student loan debt in the US cannot be discharged in bankruptcy. Add to this insult a national and corporate culture that obsesses over college degrees, inflating their perceived utility while simultaneously deflating their worth.

 

[civvver]

Simple, build more public universities. Colleges raise tuition every year and still turn students away. The demand for college out paces the supply of enrollment slots so universities can raise prices every year and not be affected in their attendance rates.

It also doesn't help that tech industries still want 4 year and master degrees when they aren't really necessarily. All you really need is some good trade school/online course work/internship program opportunities to get into something like IT or programming.

 

[hobbsyoyo]

Yeah. I'm not sure who came up with this prank on the younger generation.
[old man rant] when I went to college, it was one of the top engineering colleges in the country and my first semester tuition was 450.00 dollars [/old man rant]

Even assuming a 10 fold increase over time that would be only 4,500 in today's dollars. For a stellar education.

$4,500 dollars for a single semester is still a ton of money. Multiple it by 8 and that's the cost of the total degree - which is still too much though less than the actual average if I'm not mistaken.

Double checked and according to google the average is $30K on the nose.

 

[galdre]

Not sure what I think of the idea of bailing out people with student debt. People with student debt definitely need protection though. Would it be feasible to forcibly get rid of penalties and and lower the interest rate?

The cost definitely needs to be lowered. When I looked at the cost of the state university I went to, if I assumed I was living on campus (based on their living expense estimate), took out the full federal loans and received the full Pell grant I would still come up $40k short for a 4 year degree. That's insane.

 

[Lexicus]

Double checked and according to google the average is $30K on the nose.

Average debt, or average cost of a degree?

It wouldn't be for me, yet somehow I get the impression that the ones I'll still be paying on, the ones that absolutely have monopolized my accessible cashflow for my entire married life, will somehow magically not be the right type to be forgiven, or be too old, or be too young, and thanks for paying ahead on a couple of them so you'd have breathing room for a kid during the last half of the decade, but you're not getting that back stoooopid. Then all the bastard kids will be buying out the houses in the market that I still can't afford!

Now we gotta figure out how to get people thinking this way about bankruptcy. "You mean the debts of the rich are routinely forgiven, but mine aren't?!"

 

[hobbsyoyo]

Simple, build more public universities. Colleges raise tuition every year and still turn students away. The demand for college out paces the supply of enrollment slots so universities can raise prices every year and not be affected in their attendance rates.

It also doesn't help that tech industries still want 4 year and master degrees when they aren't really necessarily. All you really need is some good trade school/online course work/internship program opportunities to get into something like IT or programming.

That's not so simple. The states do not have or are no longer willing to spend the money to build schools at the pace that is required. Once they are built, they will have to further be funded for ongoing operations and unless the states actively cut costs on a per-school basis, they won't be able to maintain them and keep costs down to students. In other words, taxes have to be raised or other parts of the budget slashed to make this work if done through the state level.

The Feds have far more power and resources to open up other avenues of tackling this problem that aren't really open to the states.

This doesn't address the $1 trillion dollar outstanding debt obligation from students - most of which are very kids.

It's like as if the the generation that grew up in the thirties were told they had to owe a year's salary to banks instead of getting the GI Bill.

 

[Farm Boy]

Illinois public universities are unfunded and crumbling, woot woot. I mean, the budget has been crap for decades, the pensions are super humped, but it's all the Republican governor's fault somehow, instead of everybody's. For the past 50.

Hobbs. You have a kid when you want a kid. They need love more than cash, but you might want to wait until you can live in a decently performing school district first. That'd be my main thing. Past that? Having two functional parents that are invested goes so far all on its own that it's most of it.

Heh, wouldn't help me any Lex. Those loans have cosigners. They're attached to the literal farm. I maintain life insurance to cover them in case I croak off not because I have enough money to actually insure my son through college, but because just in case I don't want the thing that follows a burial to be an auction.

 

[hobbsyoyo]

Not sure what I think of the idea of bailing out people with student debt. People with student debt definitely need protection though. Would it be feasible to forcibly get rid of penalties and and lower the interest rate?

The cost definitely needs to be lowered. When I looked at the cost of the state university I went to, if I assumed I was living on campus (based on their living expense estimate), took out the full federal loans and received the full Pell grant I would still come up $40k short for a 4 year degree. That's insane.

Lowering penalties and interest wouldn't really help. To a kid that can't find a job making more than $15/hr, stretching out the payment cycle to 30 years instead of 10 (which is the effect of higher interest) doesn't make a real difference in their ability to start a family, buy a house or have a decent quality of life for the foreseeable future.

We're long past the point where prices, penalties and interest could be controlled and that would solve the problem. There is a looming crisis of unpayable, unforgivable debt that makes the housing crisis look like chump change that needs to be fixed as soon as possible - before it explodes really. Penalties and interest also wouldn't need to be changed if the current debt is forgiven or bought out and prices are brought down hard immediately following that. And lowering penalties and interest won't fix the actual problem anymore, which is outstanding debt of monumental, unfathomable size.

It also doesn't help the economy right now - instead of starting lives (buying houses, having kids, buying cars, etc) they spend 10+ years paying money to a bank that for all I can tell doesn't put it back into the economy in a productive way. It makes spreadsheets look nice for billionaires and banks but I don't see that money going back out as loans to business or being used for anything productive.

Average debt, or average cost of a degree?



Now we gotta figure out how to get people thinking this way about bankruptcy. "You mean the debts of the rich are routinely forgiven, but mine aren't?!"

Average debt.

I also find that all average degree costs put out by schools are a fiction.

 

[rah]

Some of it was way over optimistic thinking. Many were taking out loans to go to schools that they really didn't need to go to when the job market for graduates was bad.
Most of the money I spent on school was made while I was in High School working multiple jobs. Borrowing was a last resort and only necessary for my senior year. So my end burden was not that high. Many of todays kids would have been much better off forking over for a trades school or a couple of years in a junior college before transferring to a more expensive one. Many of their parents failed to consul them appropriately. (of offer some financial assistance.)

 

[hobbsyoyo]

Illinois public universities are unfunded and crumbling, woot woot. I mean, the budget has been crap for decades, the pensions are super humped, but it's all the Republican governor's fault somehow, instead of everybodies. For the past 50.

Hobbs. You have a kid when you want a kid. They need love more than cash, but you might want to wait until you can live in a decently performing school district first. That'd be my main thing. Past that? Having two functional parents that are invested goes so far all on its own that it's most of it.

Heh, wouldn't help me any Lex. Those loans have cosigners. They're attached to the literal farm. I maintain life insurance to cover them in case I croak off not because I have enough money to actually insure my son through college, but because just in case I don't want the thing that follows a burial to be an auction.

Yeah Illinois is all kinds of messed up. I was on a community college board during the financial crisis and it was a nightmare situation. The state simply wouldn't send money when it was promised and when it arrived, it was short. People went on furllow all the time. Meanwhile enrollment went through the roof which meant the school had to grow to accommodate that. It's one thing to say 'well then the school shouldn't grow beyond what it could afford to' but we have to remember that Community Colleges (and State Unis) are a public service that's meant to help people overcome business-cycle catastrophes.

Morally, the school had to grow with enrollment to serve its community and provide relief for the unemployed through training/re-training. But the only way they could do it was on the backs of the students they were trying to help. So every year prices went up even as the board did their best to control spending.

Ugh I almost didn't put anything in there about my own thoughts on having kids because I really didn't want to get into my personal details. But I still wanted to share my thoughts and things I struggle with because I know there is an entire generation in the same boat. That's the point I'm trying to make, not whoa is me but whoa is our country if the next generation can't afford to raise kids. This causes a ton of problems because the less people that feel they can afford to have kids (even if they could), the less kids they will have. That's how you take a short cut to becoming Japan with a shrinking population.

 

[Zkribbler]

Yeah. I'm not sure who came up with this prank on the younger generation..

I do. I was there when it happened. It was by California Governor Ronald Reagan. This anti-student innovation was later copied across the country
Later. Republican George Deukmajian ran for governor, promising to "put education first." His first act as governor was to institute tuition upon community colleges.
Still later, at the time of the dot.com crash, states countered revenue shortfall by drastically raising public university & college tuitions.

.

[old man rant] when I went to college, it was one of the top engineering colleges in the country and my first semester tuition was 450.00 dollars [/old man rant]
.

[older man rant] My first year at UCLA, tuition was $0. [/older man rant]