I'm a big fan of Dave Ramsey and was watching some of his youtube videos. One of them was with Mark Cuban and they mentioned that the student loan concept was potentially going to be the next bubble that is close to bursting much like the housing market bubble. This was essentially because loans are so easy to obtain and are "guaranteed money" much like the housing market was. Anyone agree with this? Definitely don't want to be late to this party if its true.
Student Loan Bubble?
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Definitely true, that's why I'm taking them.
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man, this thread is so easy to segue into the ... Carrib schools are a scam firestorm, that I might just do it for the popcorn and lols.
For profit Carrib schools can get you on the hook for a couple hundred g's of debt and return jackshiet. So consider who's benefitting from this bubble. There's been outcry about this a few month back, but as far as I know, their special status as qualifying for federal loans has not been rescinded.
For profit Carrib schools can get you on the hook for a couple hundred g's of debt and return jackshiet. So consider who's benefitting from this bubble. There's been outcry about this a few month back, but as far as I know, their special status as qualifying for federal loans has not been rescinded.
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university tuition is based on willingness to pay and student's willingness to pay is based on the amount of loans they can get. ultimately, I believe the cause of the ever increasing tuition problem is the willingness of the government to guarantee and banks to lend increasingly ridiculous amounts of money to students.
They're both extremely similar in the regards that I can't stand hearing people who made the choice to unwisely take out student loans or a risky mortgage whine about how unfair it is that they have to pay them back.
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Sardinia
I think of student loans as the new trending debt, however this is only because the underlying bubble that currently exists is the education bubble. With all bubbles, the amount of people investing into it (yay students) results in saturation and therefore results in the benefits of receiving one to be diminished by competitiveness in the market.
Student loans isn't a bubble because students are taking measures to pay it off. I presume that credit card and mortgage debt are on the decline because students are limiting the bleed-out by living with parents and not moving out until they are able to handle the student debt due to landing a "solid" job. Think about the first impulse you have when something goes wrong. It's to move in with a friend or the parents if you haven't done so already to stop potential bleed-out therefore remedying the need for credit loans. It's impossible to tap into a mortgage considering chances are most people opt into apartment space or sub-leases rather than buying a home with an equity line they can tap into on rainy days.
The U.S. government has data which states that from 2007-2016 there has been a decreasing trend in the demographic of individuals < 30 who own a home contrasting with the rising trend in student debt.
Student loans isn't a bubble because students are taking measures to pay it off. I presume that credit card and mortgage debt are on the decline because students are limiting the bleed-out by living with parents and not moving out until they are able to handle the student debt due to landing a "solid" job. Think about the first impulse you have when something goes wrong. It's to move in with a friend or the parents if you haven't done so already to stop potential bleed-out therefore remedying the need for credit loans. It's impossible to tap into a mortgage considering chances are most people opt into apartment space or sub-leases rather than buying a home with an equity line they can tap into on rainy days.
The U.S. government has data which states that from 2007-2016 there has been a decreasing trend in the demographic of individuals < 30 who own a home contrasting with the rising trend in student debt.
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That's also a result of banks not willing to give out risky mortgage loans anymore.
Students. The bubble has bursted in many fields (law, pharm, vet). You don't see those unis failing. Believe it or not, the med school tuition bubble may not have burst yet. Right now, we will have class of 2020 students with $400-500K on the high end after residency and salaries for non-primary care specialties average $280K ($193K after federal taxes--> Not unreasonable to pay $140K/yr towards loans *these salaries may be different than starting salaries). Below $200K is where those loan level becomes too much to manage well
It will burst if reimbursements decline too much or if residencies expand like the AAMC wants (and the gov't might start increasing residencies just to avoid the massive defaults of all the Carib and US med school grads who won't be able to match since schools are expanding so rapidly). We're playing hot potato with the soul-crushing debt and some of us will get destroyed by it. That's the scariest part about med school debt- we are making decisions now based on salaries that could be completely different in 2025 when we finish residency. I have calculated the costs and believe I could manage my payments, but a tax increase or creation of a gov't funded single payer system could completely rip my plans out from under me.
Edit: Also, if you are from Texas, you are set. Cheap tuition, quality uni, nice practice environment
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Banks were never the ones who gave out the mortgages loans. They bought the loans from mortgage providers which were then repackaged into MBS which had dubious reputation, but were never called out by credit rating agencies because all the banks had significant skin in the game by the time the problem had escalated. Banks still regularly make risky transactions in which they gain collateral if the deal goes bad and equity if the deal goes well in return for making loans.
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Wouldn't it make more sense to take them after the bubble has burst (assuming there is one)? As others have noted, student loans are non-dischargeable: if we take them out when the cost of education is at its peak, we bare the full costs of our decision.
Unfortunately, for those of us entering into medicine at this point in time, there's not really a lot of other options out there.
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Because either way you're going to have to cover the cost via your own money or loans. At least with loans, I can invest my money while the loans don't collect interest. Also with a bubble burst, we don't know what the outcome will be, maybe we'll get by with free loans
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Bhahahaah. No way that would happen- the loan forgiveness part. Even Bernie's plan involved decreasing loan interest rate for people with loans rather than forgiving them. And the loans always collect interest.Because either way you're going to have to cover the cost via your own money or loans. At least with loans, I can invest my money while the loans don't collect interest. Also with a bubble burst, we don't know what the outcome will be, maybe we'll get by with free loans
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The only reason it is good to buy now is that even after the bubble bursts, tuition will continue to increase and we still have a decent chance of getting to attendinghood with enough time to pay off our loans before the field changes too much.
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Graduate school loans start accruing interest the moment you take them out.Because either way you're going to have to cover the cost via your own money or loans. At least with loans, I can invest my money while the loans don't collect interest. Also with a bubble burst, we don't know what the outcome will be, maybe we'll get by with free loans
Also, hoping that your loans will be magically forgiven after you've signed a legally binding contract that can and will follow you until the grave is naive, to say the least. But hey, if that's what you want to bank on, go for it.
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I thought that federal loans only start collecting interested 6 months after you graduate?
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@coldcase331 Subsidized v. unsubsidized. If the loans are subsidized then the government pays off the interest while you're still in school. Unsubsidized loans means the interest accrues from the moment you take it out.
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I have the means to fund my education, I'm just saying even with interest, I could probably benefit from taking them and investing my current funds (I end up ahead as long as I make above 6%/year). If the bubble bursts and they end up lowering interest rates, even better for me.
Nope. They gain interest as soon as you take them out. If your school is over $300K, expect another $50K to capitalize on your loan when you graduate (the interest on your loans capitalize after graduation. So $300K becomes $350K and now the daily interest is calculated using that $350K)
If you have the money to fund your education. Do that. Don't risk having an investment that doesn't make over a 6% return. Use the money that everyone else will be using to pay off their loans as investment money. A lot less risky
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If you're an undergraduate with a subsidized loan, you may be right that investing your money instead of paying for school is the better option.
The lowest rate for a government loan you can get for medical school is 5.84%, so you're not technically wrong in saying that 6%+ in investments is better. But that entirely depends on how much you've got stashed away. $300K? Nice. $30K? Might want to put that money towards your tuition and avoid more debt than necessary.
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Lol. Oh boy. This is what you get for asking fresh-out-of-college wide-eyed students to borrow hundreds of thousand of dollars of student loans.
Graduate School loans used to be subsidized ( = government pays interest for when you are in School). They no longer are = unsubsidized.
But in either case, the interest would start accumulating as soon as you graduate from School and are in repayment, and in both cases, the interest starts accumulating even as soon as you enter your 6-month no-repayment period.
And another tidbit for people who are blurry on the whole subsidized vs unsubsidized interest thing:
I went to go consolidate my undergrad Perkins loans with my undergrad Stafford loans. In the contract you sign to approve the consolidation, it says that if you consolidate, you lose the subsidized interest benefit if you go back to school--> Do not consolidate undergrad loans before starting med school! Perkins and subsidized staffords do not accrue interest during med school. It will only save me $3.6K in capitalized interest which is about 0% of the debt I will have after residency, but it is something
I went to go consolidate my undergrad Perkins loans with my undergrad Stafford loans. In the contract you sign to approve the consolidation, it says that if you consolidate, you lose the subsidized interest benefit if you go back to school--> Do not consolidate undergrad loans before starting med school! Perkins and subsidized staffords do not accrue interest during med school. It will only save me $3.6K in capitalized interest which is about 0% of the debt I will have after residency, but it is something
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Y'all, wrong thread, sorry, and will delete this post as soon as it's responded to, but how do you change your status to Medical Student (accepted)? lol
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I'm sorry, I can't understand what you're saying from all the way up on your high horse. I'm very well aware of how loans work, just confused about when the interest started.
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Adcom: When did your student interest for medicine begin to accrue?
Student: Never, I always worked hard so I never had a financially toxic investment.
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I'm sorry you felt that I was speaking from a high horse. Not my intention. It's just a big deal to borrow that much, and you will benefit from mastering all the details as much and as soon as possible to make as informed a decision as you can. My comment was not directed at you only, but your not being aware of that aspect of interest capitalization pointed to me the greater "problem" that I perceive that lots of medical students go into this borrowing enormous amounts of money but not realizing the nitty-gritty details of the $$$ they borrow, which can really come and bite you back years down the line.
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I'm sure medical students aren't the bulk of the issue, since we will have a good return on our investment. That student who shouldn't be in college in the first place (trust me, I've tutored plenty. Really highlighting importance of fixing K-12 first) taking out 100k+ to get a cinema history or other useless degree that has no return on investment is the problem because they will never be able to pay them back, even if they knew all the mechanics behind it.
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Very true. Or students going into degree mill for-profit colleges that are awarded basically worthless degrees.
@coldcase331 Very good point. As long as physician reimbursement doesn't plummet, I will feel safe with my loans.
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There certainly is a bubble, but it is different than what most people are thinking it is.
The loans are going to get repaid. They're guaranteed by the Government and they will take it out of your social security check if need be.
The real bubble is in the tuition and living expenses. Especially the dorms and what not. When you have everyone being able to cover "whatever it costs" to go to a school and live in a city, there's no price pressure. College towns are expensive to live in now: they never used to be. Your loans can cover your hovel/dorm, and they will cover it even if it costs a ton. There's no pressure to keep tuition down: most people aren't 'paying' it anyhow. They never write a check; they click a button and enter into indenturement instead. It's why in the '70s you could pay for Yale's tuition on a part time minimum wage job, but now most public universities cost more than you could make full time at minimum wage.
The loans are going to get repaid. They're guaranteed by the Government and they will take it out of your social security check if need be.
The real bubble is in the tuition and living expenses. Especially the dorms and what not. When you have everyone being able to cover "whatever it costs" to go to a school and live in a city, there's no price pressure. College towns are expensive to live in now: they never used to be. Your loans can cover your hovel/dorm, and they will cover it even if it costs a ton. There's no pressure to keep tuition down: most people aren't 'paying' it anyhow. They never write a check; they click a button and enter into indenturement instead. It's why in the '70s you could pay for Yale's tuition on a part time minimum wage job, but now most public universities cost more than you could make full time at minimum wage.
