Student loans, good or bad for our nation?

[rigney]

Having a 24 year old grandson with a hearing impediment is crushing. Knowing that he was not allowed to graduate from High School because of his transcripts being lost, infuriated me. After some arm twisting and threatening gestures, miraculously they showed up. He is on the bottom rung of society today because of this malady. A few weeks ago my daughter, his aunt; took him to a lab and had tests done in this regard. $4,000.oo later and with proper hearing aids, this lad can hear very good. At present, he works 2 full time jobs that he would never have likely had without the aids. He wants to go to college if our family can somehow pull it off, without student loans. Do you think I'm not proud of him?

http://www.nytimes.com/2012/05/13/business/student-loans-weighing-down-a-generation-with-heavy-debt.html?pagewanted=all

Edited July 17, 2012 by rigney

[Phi for All]

Why is he against applying for a loan? He lives in a society that has set aside part of its tax revenue to loan money to help people go to college and pay the loan back when they're more gainfully employed. Does he somehow view this as charity? Would he not pay the loan back? Would he be more inclined to pay back a loan from family or a private institution?

 

Very happy to hear about his situation, btw, I think it's great that his family could help out. There are many people who don't have that kind of support (for the hearing aids, I mean; fortunately support exists for those who want to go to college but can't afford it).

[rigney]

Why is he against applying for a loan? He lives in a society that has set aside part of its tax revenue to loan money to help people go to college and pay the loan back when they're more gainfully employed. Does he somehow view this as charity? Would he not pay the loan back? Would he be more inclined to pay back a loan from family or a private institution?

 

Very happy to hear about his situation, btw, I think it's great that his family could help out. There are many people who don't have that kind of support (for the hearing aids, I mean; fortunately support exists for those who want to go to college but can't afford it).

The lad is a computer geek and loves it. Actually we have a rather extended family and could probable pay for his schooling without too much pain, but that's not what he wants. He hears well now with modern technology and is loving every minute of it. I trust his judgement, regardless of his decision. Edited July 17, 2012 by rigney

[Phi for All]

The lad is a computer geek and loves it. Actually we have a rather extended family and could probable pay for his schooling without too much pain, but that's not what he wants. He hears well now with modern technology and is loving every minute of it. I trust his judgement, regardless of his decision.

That's cool, and I wish him the best. Sometimes I think kids who have to scrape for what they get appreciate it more.

 

But you didn't answer any of my questions. I know paying back ANY loan can be burdensome, but what is it about student loans that your grandson doesn't like?

[doG]

Your query reminds me of an article in the latest copy of Imprimis I received, Federal Student Aid and the Law of Unintended Consequences. You might find it informative. In short Professor Vedders states:

 

FEDERAL STUDENT financial assistance programs are costly, inefficient, byzantine, and fail to serve their desired objectives. In a word, they are dysfunctional, among the worst of many bad federal programs.

 

These programs are commonly rationalized on three grounds: on the grounds that assuring more young people a higher education has positive spillover effects for the country; on the grounds that higher education promotes equal economic opportunity (or, as the politicians say, that it is “a ticket to achieving the American Dream”); or on the grounds that too few students would go to college in the absence of federal loan programs, since private markets for loans to college students are defective.

 

All three of these arguments are dubious at best. The alleged positive spillover effects of sending more and more Americans to college are very difficult to measure. And as the late Milton Friedman suggested to me shortly before his death, they may be more than offset by negative spillover effects. Consider, for instance, the relationship between spending by state governments on higher education and their rate of economic growth. Controlling for other factors important in growth determination, the relationship between education spending and economic growth is negative or, at best, non-existent.

 

If the Law of Unintended Consequences ever applied, it is in federal student financial assistance. Programs created with the noblest of intentions have failed to serve either their customers or the nation well...

 

I highly recommend reading the rest of his opinion on the topic.

[Moontanman]

My sons couldn't have gone to university if they hadn't received student loans... I think I am going to have to go with they are good...

[rigney]

That's cool, and I wish him the best. Sometimes I think kids who have to scrape for what they get appreciate it more.

 

But you didn't answer any of my questions. I know paying back ANY loan can be burdensome, but what is it about student loans that your grandson doesn't like?

I've really never questioned him on the subject or why he feels that way about it. Personally, i would jump on it with all four if it were me. I have a little left in the poke that I could and would give to him in a NY minute, but he's just too damned proud and independant. And your questions, i can't answer them for the lack of knowing?

 

Your query reminds me of an article in the latest copy of Imprimis I received, Federal Student Aid and the Law of Unintended Consequences. You might find it informative. In short Professor Vedders states:

 

I highly recommend reading the rest of his opinion on the topic.

Even if I read it, there would be little to say on my part. The kid isn't brilliant, only shiny. I think his next 50 or sxty years will (hopefully) justify his decision. Thanks! Edited July 17, 2012 by rigney

[padren]

I'm am pretty ignorant on the topic of student loans, but it sounds like it's headed in the same direction as the mortgage fiasco - in that, the people who make money issuing loans are almost entirely insulated from the risk of those loans going bad, and not enough emphasis is applied to ensuring student loans will either be paid back or even are in the disciplines our economy demands.

 

I think real concerns like the raising cost of tuition is being aggravated by the "but getting a loan is so easy now so it doesn't matter" mentality in much the same way that sub-prime mortgages aggravated conscientious buyers dealing with inflated housing values.

 

 

I don't know what to make of it all, but I am really glad I am not going to college right now.

 

Personally, while the "can't be discharged in bankruptcy" clause on student loans is somewhat understandable, it's a solution that is only going to put a lot of young adults in serious financial distress and cause more volatility down the line. I don't think student loans are bad in principle but I don't have a good feeling about the current situation.

 

 

That said, scholarships exist for a reason, and shouldn't be seen as handouts for the pitiful - people donate to scholarship programs all the time to recognize excellence, perseverance and unique qualities or challenges. I definitely recommend those wherever available.

Edited July 17, 2012 by padren

[rigney]

I'm am pretty ignorant on the topic of student loans, but it sounds like it's headed in the same direction as the mortgage fiasco - in that, the people who make money issuing loans are almost entirely insulated from the risk of those loans going bad, and not enough emphasis is applied to ensuring student loans will either be paid back or even are in the disciplines our economy demands.

 

I think real concerns like the raising cost of tuition is being aggravated by the "but getting a loan is so easy now so it doesn't matter" mentality in much the same way that sub-prime mortgages aggravated conscientious buyers dealing with inflated housing values.

 

 

I don't know what to make of it all, but I am really glad I am not going to college right now.

 

Personally, while the "can't be discharged in bankruptcy" clause on student loans is somewhat understandable, it's a solution that is only going to put a lot of young adults in serious financial distress and cause more volatility down the line. I don't think student loans are bad in principle but I don't have a good feeling about the current situation.

 

 

That said, scholarships exist for a reason, and shouldn't be seen as handouts for the pitiful - people donate to scholarship programs all the time to recognize excellence, perseverance and unique qualities or challenges. I definitely recommend those wherever available.

Three of my children have received grants and scholarships as well as a dozen or more of their cousins, which we are very fortunate and thankful. And none of them, "other than one grand nephew" are into politics or big business for which I am thankful. And me, I just keep out of the way.

[CharonY]

Actually, I think that the idea of having to take up loans or receiving scholarships just to get a higher education is a bad one. A certain level of education (and ideally the associated broadening of one's perspective) is something that benefits society as a whole and levels the playing field. Whether colleges are well designed to achieve that may be a slightly different issue, though.

 

 

[EratosthenesII]

Student loans are another reminder that many things in a civilised society are good for an individual AND good for civilisation.

At the end of a day a banker may leave the office saying "great day - another $3million in the pocket."

 

At the end of the same day a trauma surgeon leaves his hospital saying "Great result considering his vitals at the time of admission. But he would not have come through without the magic of the Anaesthetist, two hours into the op - live is good"

 

The surgeon and the banker are from different worlds. The surgeon should have his training provided by the state, the benefit to the state of having medical people is clear to all and the surgeon will never get the financial rewards enjoyed by the banker.

 

The money lenders would never have introduced student loans without loans creating another income stream for the lenders. Who created the illusion of a "trickle down economy"? Probably the lenders who created the "trickle up economy" for their own gain. Bankers make easy money declaring all transactions to be for private good. Through student loans, the bankers are futureproofing themselves and 20 year olds

 

I can understand this 24yr old having an aversion to student loans. What is there to like, when banks soak up so much of every community's money, to offer it back, now at the cost of as yet unearned money?

 

 

 

 

 

[padren]

EratosthenesII, I think it is fair for a banker to make money on loans that are inherently at risk - it's also the only way for him to draw a salary. The problem I have is when the banker knows he can bundle the loans into whatever number of schemes are necessary to transfer risk. The fact of the matter is - if I loan you money and then transfer ownership of my interest in your debt to a third party, it no longer affects me whether you make your long term payments or not. It will impact whatever suckers Wall Street got to buy into the scheme, but my life will get better the more loans I am able to write.

 

 

I really haven't done enough research to say that is what's happening - it's more my concern, given what's popped up on the news so far.

[CaptainPanic]

In the USA, the evil is not the student loan. Student loans are fantastic, actually. The real evil are the ridiculously high tuitions (or the lack of government support for education).

 

Compared to the USA, the problem is a lot smaller in almost every European country: tuition for a university is typically lower than 2,000 euro per year for all EU students, possibly with the exception of the UK. In some countries, university is even free (completely paid with tax money). That means that at the end of your study, the loan will be small (if not zero), and it's easily paid back. A study should not be a financial commitment for the rest of your life.

 

Obviously, since nothing is really for free, the downside is that we pay more tax over here. The deal is that I don't have a big debt at the end of my study, but I do pay more tax. So, although the financial burden for the whole country is the same, individually we take smaller financial risks when we start a study.

[John Cuthber]

Fundamentally I'm against student loans because there should be student grants.

 

I guess it depends on what you think the selection criteria for university entry should be.

Do you think the decision to go to university should depend on

whether you have the mental ability to benefit from it, and go on to a more productive life or

whether or not you (or more realistically your parents) are rich enough to fund it?

 

From society's point of view, I think that's a no-brainer.

There are people who have the potential to offer a lot to society if properly educated but don't have the cash to go to university.

If you don't have some provision for state funding of those people then society misses out.

 

 

Fundamentally, what is the difference between primary/secondary education which practically everyone accepts should be funded by the state and tertiary education which many people don't think about in the same way?

 

There's no way I would have been able to afford to go to university if it were not for the grant system.

Because I went to university I got a better job and paid more tax.

I'm pretty sure I have already much more than repaid the investment which the state made by giving me a grant. They are now making a "profit".

[CaptainPanic]

Are there countries where money alone can get you into university? (And will it eventually also get you a degree??).

 

In our system in the Netherlands, you must have finished your highschool at a certain level (the highest level, which gives access to university). Without it, you can forget about it, regardless of how much money you have.

[rigney]

Are there countries where money alone can get you into university? (And will it eventually also get you a degree??).

 

In our system in the Netherlands, you must have finished your highschool at a certain level (the highest level, which gives access to university). Without it, you can forget about it, regardless of how much money you have.

On your first questions, yes. And I agree whole heartily with your system, if it is such.

[JohnB]

Fundamentally, what is the difference between primary/secondary education which practically everyone accepts should be funded by the state and tertiary education which many people don't think about in the same way?

 

John, that is a bloody good question.

 

After thinking on it for a day or so I can only come up with two reasons.

 

1. People don't mind funding Primary/Secondary schools because it's "for the kids" but once a person get s to Uni they are considered adult and should therefore pay their own way.

 

2. It smacks a little of "Central Planning" and people might be scared that the Feds will be setting placement limits.

 

Neither of these strikes me as really being "good enough" as reasons. Especially since Trade/Technical College courses only charge a nominal fee and they are for adults.

 

The only other possibility I can think of is that if it was free then maybe too many people would be chasing degrees which can mess up an economy. We had a big push for people to get degrees some years ago and it's caused some problems. As of about 5 years ago there was circa $200 billion worth of development stalled. We have plenty of Architects to design things and Engineers to engineer them, but nowhere near enough concretors, plasterers, electricians, fork lift drivers, etc to actually build them. Even now plasterers who do office blocks are booked solid for the next 6 years or so.

 

Even that doesn't feel right as an answer though.

 

Anybody else have an idea?