$400B Student Loan Losses

[SigmaFS]

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That's the projection - The U.S. government stands to lose more than $400 billion from the federal student loan program. It shouldn't be too much of a surprise given the Income Driven Repayment and PSLF programs.

From the WSJ article; "Borrowers in income-driven repayment will repay, on average, 51% of their balances, while borrowers in other plans will repay 80%, the Education Department’s analysis shows."

Student Loan Losses Seen Exceeding $400 Billion

 

[RangerBob]

The whole system needs reform. As a moderate liberal I support the idea that everyone that wants to should somehow have the opportunity to go to college. (Though whether we should encourage everyone to go to college is a valid question)

The good intentions of guaranteeing loans for everyone have resulted in colleges racking up tuition way above inflation and students going further and further into debt. Sometimes with good intentions we actually cause more harm.

Top colleges (typically with wealthy/extremely smart/talented students) are sometimes tuition free due to their large endowments, which just recreates the cycle we were in before universal guaranteed federal loans-that only the rich could afford college. We’re literally heading back where we started, except now we’re all in debt.

Colleges are certainly partly (perhaps mostly?) to blame-they likely don’t need so many support staff (just like our profession) as administration staff far outnumber actual professors and have grown at a much higher rate. And students don’t need apartment style housing with single bedrooms, jacuzzis/etc. Traditional dormitories actually foster more interaction/dialogue and learning. If the dorm is too loud that’s what the library is for.

I get they do those things to attract students. It it’s literally a zero sum game if they all keep raising tuition to build more to attract more students.

 

[TMP-SMX]

There needs to be a cap on tuition benefits for PSLF or other forgiveness plans and students need to stop going to universities that keep increasing costs. PSLF itself I believe is a good program as it subsidizes those who provide a public service to others who might otherwise go into the private sector. However, it is just a bandaid to a systemic problem (much like expanding Medicaid access in medicine). Community colleges should be heavily subsidized and expand trades. Administrators create more need for their existence over time and they serve little purpose to student education (much like medicine).

 

[SigmaFS]

Schools are not incentivized to control costs. The incentive is to continue to price education, particularly professional programs, to what the market will bear. Nothing changes until federal loan programs acknowledge and limits the financial spigot.