Yeah they need to figure something out because the debt most college students are faced with is ridiculous. An "affordable" school will still make you take out enough loans to buy a decent new car. This punishes the poor for trying to get an education to be more comfortable in life and needs to change.
I get that argument however the federal government isn’t a bank - federal student loan programs weren’t designed be to profit generators. They were designed to increase access to education for those without the means to foot the bill up front. This is more of an investment mentality than anything. In terms of having nothing to go after - the federal government is extremely capable of collecting money it is owed through garnishments and other means, particularly since student loans cannot be discharged in bankruptcy.
You are absolutely right, and that's why the loans are priced where they are, and not at credit card rates, which is where they belong based on the risk profile of the borrowers as well as the loss experience of the government.
With any luck, that "something" might be free public college for all who cannot afford private, and then turning student loans back to the private sector, with no federal guarantees.
According to CBO analysis, loan programs do not operate at a deficit but generate profit. My argument is that loan programs should either operate at cost or with a modest subsidy as it is generally a good long term physical policy to have an educated and highly trained workforce. However, I think it’s fair to say you and I do not see eye to eye on this as I do not see a 5-7% interest rates on student loans to be reasonable. If loans are currently based on 10 year treasury auction rates +3-5%, surely it could be decided to lend at cost or +1%. A long term adjustment to interest rates would have a significantly bigger impact on the long term financial impact of borrowers, particularly those in social work and education, than a one time write down of student loan debt.
Sure, they operate at a profit in you don't take into account the 7.8% of the $1.6+ trillion that is in default!
Actually it takes that into account. The laughing face was cute though.Sure, they operate at a profit in you don't take into account the 7.8% of the $1.6+ trillion that is in default!
Yes, it generates a "profit" because they borrow at 1% and lend at 6%. But, they literally lose tend of billions of dollars annually.
Happens in May based on the 10 year treasury auction rate. If market conditions are steady it looks like interest rates will go up by 1%.
Thanks for the shout-out on the laughing face, but did you carefully read the document you linked?
It may, but they recently acknowledged they don't take into account expected forgiveness (PSLF, and IBR/PAYE/REPAYE) and the higher rates of delinquency they've been seeing. Nor does it take into account all the high-earning borrowers who have the capability to consolidate with private lenders, taking away the borrowers who repay reliably. Right now the program is predicted to cost a significant amount of money in the long run.
1,000,000% agree. I also fear that any "reform" will exclude us because, as a group, we will be deemed not to need taxpayer assistance due to the reasons you cited above. The program right now does NOT look to make money. It looks to have borrowers like us at least partially subsidize those who need subsidies, with taxpayers in the future covering the difference. CBO accounting aside, Congress is not unaware of the economics of the federal student loan program.
Yeah, I saw the education departments revised outlook from 2019 and 2020. Generally speaking, I don’t place a lot of faith in the reports compiled by departments that are run by political appointees as they have agendas (this goes for both democratic and republican administrations - hence the use of the non-partisan CBO). I’m definitely not arguing that loans for medical school are a raw deal. I think we ended up on this long train when Knightdoc responded that there is a good reason why mortgage rates are lower than student loans in response to my reply from a prior post about folks walking away from student loans / the wisdom of a $10k or $50k forgiveness plan as opposed addressing some of the underlying reasons for why so many loans are in default.
Yes, and the bottom line is that the appropriate benchmark would be private medical school loans, not fully collateralized mortgages issued to credit worthy borrowers.
You really have latched onto this idea of subsidizing the top 1%. Is this at all related to what I have mentioned in my posts or are you just pontificating here? My original post was in response to someone discussing folks being encouraged to walk away from student loans - which is not happening. In that post I mentioned that I would prefer a longer term approach than a one time write down of student loan balances as I believe that is a bad precedent that could create the expectation that loans will simply be forgiven down the line. If we borrow the money, I believe we should pay it back. However, with interest rates as high as they are, it creates the conditions where one‘s balance grows despite making payments on loans, folks get discouraged, and end up in default. This is a pretty straightforward fix. Granted, I also think about this in terms of my prior career in education and not my future career as an MD, where the high interest rates really do take a toll on one’s finances, particularly in a field where earning potential is quite low and the education requirements are quite high. $30k in student loans usually yields about a $1200 increase in salary for teachers, but costs $1800 in interest per year before starting to repay the principal.
No, I was only addressing your point about med school loan interest rates being too high because they are higher than mortgage rates.
I believe I said student loans in general in that post.
You did, but what is the relevance of that in a thread about repaying student loans on SDN? I just (apparently mistakenly) assumed you were talking about our student loans, not student loans for inner city grade school teachers, who end up eligible for PSLF anyway, don't they?
Nope, it was in response to the person talking about $50k in student loan forgiveness proposal in the news. Also just as an aside, we generally do not use the term “inner city” when referring to urban underserved communities. It was a common phrase for a long time but is now regarded as dog whistle. I mention this because I worked in urban underserved communities for the duration of my career and it’s a phrase that could cause problems in the future - literally just talked about this in one if my M1 classes.
100.
Thanks for the heads-up! And, just to continue respectfully disagreeing with you, I don't have strong feelings one way or the other about forgiving any specific amount of existing debt, and I'm not sure it's necessary. The amount that can be repaid ultimately will be repaid, and the balance won't, whether it is forgiven now, or at death.
I think dead end degrees with low economic value should require one to sign a paper basically stating that they know the field had a lousy job market so they can't complain later on that they are 100k in debt for a Greek mythology degree.
It's not about getting people to sign a piece of paper, because you can't get blood from a stone, no matter what they sign. The answer is to not fund it at a private school, which would force schools to bring their pricing in line with people's willingness and ability to pay with whatever money is available in the private market. Believe me, banks will figure out what to fund and how to price it.
That sounds like a great plan that would work, I just feel like people will call that anti capitalist because it's "controlling the market".
Maybe, but it would actually be the exact opposite of controlling the market. It would guarantee a free education for everyone able to be admitted to their IS public schools (2 year, 4 year, flagship, whatever) and allow the market to decide the value of all other schools and degrees, with zero public subsidies.
No, not really, because I'm only talking about public schools, which already receive huge public subsidies.
If they could cap how much public schools cost and focus on making the quality of the education great, than that would force private schools to price their tuition more reasonably. A smart person isn't going to want to go to a school that's 60k a year for a similar education that costs 10k a year at a state school. That would allow the market to control the prices. Alot of state schools offer need based scholarships also that will almost completely pay one's tuition at a school at that price if they qualify.
That‘d definitely be an improvement. My public school has definitely been on a spending spree over the past few years building out new dorms, rec center, student centers, athletics facilities, etc with little focus on academics. I attended on scholarship in the early 2010s and the price has increased by about 80% from when I started about a decade ago. While some of that increase can be attributed to declining state funding and increased personnel costs, a lot of it stems from amenities that are extraneous to its core function.
That's a shame Ohio State has kept their tuition static for a while, but they try to get your money other ways. I think state schools should be capped at 10 or 15 thousand a year max. That way the Pell grant can fund a decent portion of the tuition. I was lucky enough with Pell grant and other grants and scholarships that my tuition was free, but I had to take out loans for living expenses.
Yeah, well, gotta keep up with the competition. It's easy when everyone can get guaranteed loans and worry about repaying later. Less so when banks are making the lending decisions, building in profits and the cost of defaults, as well as refusing to lend to everyone. Trust me, that would put significant downward pressure on costs, guarantee access to those who need it, and probably cost not much more (or maybe even less) than is being spent now on loans that will never be repaid.
This sounds very doomy and gloomy. "Unlimited" is a very large number. What would you say is the number, discounted back to present value, that would justify chasing the higher earning potential of a physician as compared to the alternative, even taking into account the years of zero or reduced income during training? Just what level of debt DO salaries today support?
Public schools with great programs and significant tuition benefits versus private schools, in some cases have gotten just as competitive to get admissions. This forces and outs the less fortunate with less good public k-12 education at a big disadvantage as they can’t compete as easily. Many states previously allocated seats to all regions to counteract this effect, but more recently allocations have been legally overturned to be straight merit (scores and gpa’s etc) for admission. Our own local high school doubled their acceptances once our state went merit based. The value of these state schools are too great to over look for the prestige of a private school name.
You can always go to a community college and transfer over for most state schools right? That's what I did because my high school was inadequate at preparing students for college
Is it because they could or is it because they are doing wealth distribution.
It's because they could. The aggregate amount of student loan debt outstanding indicates a LOT of people are borrowing to pay those tuition bills, and that affluent people writing checks to have their wealth be redistributed is not what has been driving uncontrolled price increases since the 1980s.
Wealth is not distributed, it is earned. That is unless the socialists have their way.
Who earned it?
