Paying back loans after graduating from psyd/phd?

[WisNeuro]

It is an estimate from the CBO, but there is a lot out there suggesting that the CBO is estimating this number based on insanely low default rates that are likely not accurate and/or sustainable. Especially if there is another economic downturn. Additionally, they are only now starting to examine the effect of loan forgiveness into the equation. I think we'll be in for a rude awakening if we think this will be a profitable, or even cost neutral, system into 2025. Even if it was, if you think about a section of borrowers who will not pay back the majority of that loan, someone else is subsidizing it, other borrowers. These people are not profitable or cost neutral in any sense of the word.

I'm also angry about providers who eschew evidence based practices to practice whatever "art" they learned from someone who has no real clue on how to treat people. But, I also view a system churning out poorly trained practitioners with mountains of debt as just as much, if not more of a threat to our profession. Especially because some of the worst offending programs are accepting triple digits of these people on an annual basis.

http://www.huffingtonpost.com/2015/03/05/government-student-loans_n_6808796.html

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[Pragma]

Again, I'm against awful for profit programs and believe we need student loan reform. The only thing I am arguing about is folks acting like they are paying for other people's education already. They aren't, yet. But they will be eventually. As I said before, when it is no longer profitable, things should change. It would be nice if they did sooner.

When I was in college I had a city job during the summers. It was funded by the utility bill, not taxes, but everyone assumed that they paid for it with taxes. I'm probably splitting hairs about this but I think this sort of dialogue is important to get people thinking about the issue more comprehesively.

 

[smalltownpsych]

We are just a small part of the student loan bubble. At least we have a bit of a lid on it and an actual profession that will pay salaries, for now. i agree that the easy money is increasing the number of students being churned out by the professional schools and that we need to fight this on all fronts. We have the most influence over APA accreditation and licensure laws which act as the limit. We have less over the entire student loan system and federal government, of course.

 

[AcronymAllergy]

I'd actually never thought of the student loan system as profitable (shows how much I've looked into that side of things), but it makes sense. Even with a standard 10-year repayment period, folks will of course still be paying more than they borrowed. With a 20 or 25-year repayment period (e.g., the latter being for non-PSLF loan forgiveness), folks may still pay more than the initial amounts before forgiveness kicks in, even with reduced monthly payments. PSLF after 10 years is the one area where I could see more consistent financial loss (other than defaulting). But again, even then, the folks are still paying some portion of their original loans (at $500/month, which is pretty darn low, for example, that would still be $60k repaid).

 

[WisNeuro]

I'd actually never thought of the student loan system as profitable (shows how much I've looked into that side of things), but it makes sense. Even with a standard 10-year repayment period, folks will of course still be paying more than they borrowed. With a 20 or 25-year repayment period (e.g., the latter being for non-PSLF loan forgiveness), folks may still pay more than the initial amounts before forgiveness kicks in, even with reduced monthly payments. PSLF after 10 years is the one area where I could see more consistent financial loss (other than defaulting). But again, even then, the folks are still paying some portion of their original loans (at $500/month, which is pretty darn low, for example, that would still be $60k repaid).

But you still have to consider lost revenue the government takes on. They loan X amount, the interest is deferred Y number of years, Z amount of the loan is forgiven at 10 years. Consider the amount or money the government could have made if they had invested in other investments. In most years, that's a huge loss. So, while a borrower with a high amount may actually pay off the original principal of the loan, they still lead to a net loss when you look at it as an investment. Additionally, some borrowers will be net drags on the system (very high debt loads and defaulters). These people rely on other borrowers in the system to make up for their drag. Additionally, there is data that the system is quickly losing profitability over time even when you look at the more conservative estimates.

Bottom line, these people take up a good deal of resources that could be better used elsewhere. I'd rather fully fund tuition for 10 students in technical vocations to help rebuild some crumbling infrastructure in this country, than forgive the debt of someone who wasted 200k+ in loans at a diploma mill and is either not working in psych anymore at all, or took a low paying job that further drags down our field's earning power. There's always a cost, direct and indirect.

 

[clinpsyc87]

But you still have to consider lost revenue the government takes on. They loan X amount, the interest is deferred Y number of years, Z amount of the loan is forgiven at 10 years. Consider the amount or money the government could have made if they had invested in other investments. In most years, that's a huge loss. So, while a borrower with a high amount may actually pay off the original principal of the loan, they still lead to a net loss when you look at it as an investment. Additionally, some borrowers will be net drags on the system (very high debt loads and defaulters). These people rely on other borrowers in the system to make up for their drag. Additionally, there is data that the system is quickly losing profitability over time even when you look at the more conservative estimates.

Bottom line, these people take up a good deal of resources that could be better used elsewhere. I'd rather fully fund tuition for 10 students in technical vocations to help rebuild some crumbling infrastructure in this country, than forgive the debt of someone who wasted 200k+ in loans at a diploma mill and is either not working in psych anymore at all, or took a low paying job that further drags down our field's earning power. There's always a cost, direct and indirect.

The loudest critics of PSLF always seem to be drawing VA loan repayment. While I am opposed to the model of FSPS charging unsustainable debt, I think that the argument that PSLF loan forgiveness is wasted money is a bad faith argument. We of all people should recognize the financial incentive of preventative health and the enormous financial burden of mental illness. I don't see PSLF purely as taxpayer funded charity, I see its economic impact at least mitigated by the facilitation of a higher class of professionals treating mental illness and allowing for a more productive worker population. The premise is that the government is using the profits it makes off some students to take less profit on others so they can serve the public interest for social and economic gain without paying the entire system of public workers more money. Again, it is being exploited by schools, but 100k forgiven is not 100k lost

 

[WisNeuro]

I am a loud critic of PSLF who has never used loan repayment in any form, so I fail to see how it is a bad faith argument in the actual sense of the phrase from a personal point of view. While I do believe that the PSLF is a good idea, I also believe that it is being exploited, more and more, by for profit institutions, who are not actually providing a more productive worker population. I see the public funds being better utilized in other arenas or at least having the program refined to limit the abuses.

 

[Pragma]

I like PSLF but the criteria are really broad. It should be narrowed to just public sector positions, IMO. As it is now, I could work for the NFL and qualify.

 

[AcronymAllergy]

Agreed that while I like the concept of PSLF, the definition of "public service" should probably be narrowed a bit.

 

[smalltownpsych]

But you still have to consider lost revenue the government takes on. They loan X amount, the interest is deferred Y number of years, Z amount of the loan is forgiven at 10 years. Consider the amount or money the government could have made if they had invested in other investments. In most years, that's a huge loss. So, while a borrower with a high amount may actually pay off the original principal of the loan, they still lead to a net loss when you look at it as an investment. Additionally, some borrowers will be net drags on the system (very high debt loads and defaulters). These people rely on other borrowers in the system to make up for their drag. Additionally, there is data that the system is quickly losing profitability over time even when you look at the more conservative estimates.

Bottom line, these people take up a good deal of resources that could be better used elsewhere. I'd rather fully fund tuition for 10 students in technical vocations to help rebuild some crumbling infrastructure in this country, than forgive the debt of someone who wasted 200k+ in loans at a diploma mill and is either not working in psych anymore at all, or took a low paying job that further drags down our field's earning power. There's always a cost, direct and indirect.

That's a good one. I completely understand opportunity cost, but to apply that to the government is pretty funny. I don't know what you would call it, but with the government it might make more sense to talk about how they could have wasted even more money if they hadn't wasted it on this project.

I actually completely agree with your conclusion about it being a better use of resources to spend the money on infrastructure, just found the premise humorous.

 

[WisNeuro]

I actually completely agree with your conclusion about it being a better use of resources to spend the money on infrastructure, just found the premise humorous.

Meh, you take any large institution, and you will find area of extreme inefficiency in terms of finances. The government just happens to be an easy punching bag and a political target. I can just as easily show you an example of government agency that was axed in Wisconsin and replaced with a private firm who got public money, and now they can't account for dozens of millions of dollars. This is not an uncommon occurrence. Does the government waste money at times, sure does. Does it do a worse job of things than the private sector? Sometimes yes, sometimes no. To pretend that the government is the only system that is subject to these issues is simply preposterous.

 

[smalltownpsych]

Meh, you take any large institution, and you will find area of extreme inefficiency in terms of finances. The government just happens to be an easy punching bag and a political target. I can just as easily show you an example of government agency that was axed in Wisconsin and replaced with a private firm who got public money, and now they can't account for dozens of millions of dollars. This is not an uncommon occurrence. Does the government waste money at times, sure does. Does it do a worse job of things than the private sector? Sometimes yes, sometimes no. To pretend that the government is the only system that is subject to these issues is simply preposterous.

I wasn't pretending that by any means. I work in a medium size hospital that has so much bureaucratic waste and mismanagement at times that it makes my head spin. The best day treatment program that I have ever seen or even heard of was at a VA and the privatized CMHs that I have witnessed tend to put the dollars ahead of patient care. I imagine John Stewart could make a better joke about it than I could, but you are right, it's a pretty easy target. Speaking of him, I saw a brief clip of the Daily Show without John Stewart the other day. Definitely not the same caliber. Tough act to follow that's for sure.