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Writer: "Why I Defaulted On My Student Loans"
schwit1 writes: There are some valid points raised in Lee Siegel's 1,100 word rant against college loans (if not so much against college education). There are also some bad ones. But two things are clear: the words "personal" and/or "responsibility" were used precisely zero times. Siegel, who described himself as "the author of five books who is writing a memoir about money," is hardly a glowing advertisement for the return on nearly a decade in university just to achieve a Master of Philosophy degree.
Siegel says, "As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example. It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college. ... The rapacity of American colleges and universities is turning social mobility, the keystone of American freedom, into a commodified farce. If people groaning under the weight of student loans simply said, 'Enough,' then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education."
Siegel says, "As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example. It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college. ... The rapacity of American colleges and universities is turning social mobility, the keystone of American freedom, into a commodified farce. If people groaning under the weight of student loans simply said, 'Enough,' then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education."
There are plenty of groups that had vested interest in killing socio-economic mobility, but colleges weren't really one of them. While the colleges and universities in our country have plenty of faults to them, it is not their fault if students decide to major in philosophy and leave without good job prospects. What did this guy expect to find for employment?
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
That's what the news media said, who won't even cover the fact that he's running for President. If you want to fix this shit, VOTE SANDERS, its as simple as that.
"Malo periculosam, libertatem quam quietam servitutem." -- Jefferson
"Gimme"
"National Security is the chief cause of national insecurity." - Celine's First Law
Get your general education classes done at a junior college. Much cheaper. Then transfer to a 4 year school if you're career path requires it. Note the emphasis on the word "requires". Don't go to college if your career doesn't need it. There's no point in graduating with what essentially is the size of a home mortgage. You're starting in the hole and you don't need to do that. The sooner that you can get into the workforce with a good paying job, the better off you will be. You can buy a car and home much earlier in life. You can also start saving for retirement earlier which makes a huge impact on when and how you can retire.
"A plan fiendishly clever in its intricacies"- Homer Simpson
I agree the current way of funding uni in the U.S. is bad. However, if the government guarantees a uni attempt at a degree, how does the government put a price on it? Is Harvard comparable to Ohio State University? Does a uni degree attempt become another entitlement? Entitlements are already breaking the U.S. budget.
Maybe the U.S. could fund degree attempts at state unis. The problem there is that states have been pulling money out of higher ed. then turning around and claiming their state schools are still state schools. The some of the increase in tuition at state schools is directly the result of the state legislatures pulling money out. The legislators then turn around and claim there is a crisis in higher education with ever higher costs for the average person.
...instead of guaranteeing loans, the government would have to guarantee a college education.
that is what we do. Works fine, here in Europe.
Religous speak to God. Insane are spoken to by God. When all shut up, one can finally hear Shostakovich in peace
Proof this guy is a financial idiot, "You might want to follow these steps: Get as many credit cards as you can before your credit is ruined." Yeah- get as many credit cards as you can, because you're so awesome at paying back things you owe. Although I might agree with the sentiment behind the article- schooling can be cost prohibitive, and rich people can make tons of money off people just trying to better themselves, I totally disagree with the author's reasoning, logic, and their lack of responsibility.
Famous for sockpuppeting his own online threads.
Scott Greenfield adds some valuable additional commentary. The horror! He had to drop out of a "small private liberal arts college" and suffer the indignity of attending a public university. And this in an era when tuition was vastly lower than it is now.
I have a fair amount of sympathy for modern college students and graduates who are subsidizing a bonanza of administrators with no attendant benefit to themselves. But for Siegel to set himself up as one with such people is deeply deceitful. He wears his deadbeat status as a badge of honor.
Dog is my co-pilot.
It wouldn't be such a problem if the interest rate wasn't 8%. That's a rate for an unsecured loan, not a government backed loan.
We moved a family members student loan onto a HELOC at 3%. Now she can make progress paying it off.
I should use this sig to advertise my book ISBN-13 : 978-1501515132.
It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college>
It strikes me as absurd that people are finishing their secondary education without understanding the fact that such school loans would be crippling. We must really be doing our high school children a disservice if they have such a poor understanding of economics and mathematics./P.
Guy goes to one of the most expensive schools in the country, in one of the most expensive cities in the world. Gets an advanced degree before starting to earn a living. He doesn't have a full time job till he is 31, http://en.wikipedia.org/wiki/L.... He also manages to get fired from the New Republic for doing things they wouldn't even do http://www.nytimes.com/2006/09....
But somehow Society is to blame for HIS bad decisions.
Also missing from the article but something potentially change your interpretation of it:
1. It's there implicitly but it's worth to make explicit: "when I was 17, I went with my mother to the local bank" means that this delightful anedote happened in 1974, a long time ago both in years and in differences in tuition prices and legislation around student loans.
2. There will be a lot of talk about federally guaranteed students loans but his loans where unsubsidized private loans with a private bank.
The whole article is flamebait because it piggybacks in the current perception that the student loan system in the U.S. is flawed but offers an anecdote from a very different time and background than ours.
You realize that no one gets to choose what "their tax dollars" are spent on, right? Otherwise I wouldn't spend a dime on things like drones and NSA data centers.
Given the option, I'd rather pay for a million people to go to college than a single Predator drone.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Many people are not aware, but it's been known for a number of years amongst physics education researchers how to actually measure the change in conceptual comprehension (actual assimilation of new concepts into the part of the mind that does real-world problem-solving) that results from a semester-long class. Force concept inventories (FCI's) can be administered both before and after a class, and these tests have already been given to tens of thousands of students. These tests have revealed very serious problems with public comprehension of science that starts on day 1 of the first mechanics physics course, suggesting that it is the lecture and problem set approach which is causing the problem. Eric Mazur has made a name for himself by discovering this problem at Harvard. What he found, by studying his own students, is that the plug-and-chuggers can ace their rote memorization exams, and yet still completely fail conceptual questions in the same exact domain/topic.
See Confessions of a Converted Lecturer, or the first two devastating paragraphs of the abstract here.
The college loans are not the only scandal happening at the universities. We should also be seeking to make sure that our straight-A students actually understand the materials they are memorizing, by instituting the FCI's. This would also help parents to determine the effectiveness of the various programs, and programs would once again compete on instruction.
If you go to school for Philosophy don't be shocked when you find out the Philosophy factory isn't hiring.
Masters degree in Medieval History, bitches endlessly about the student debt she has piled up and is currently enjoying herself on a trip to Europe. It's just a shame that people have to choose between paying their bills and enjoying a few weeks in Italy.
Why should I guarantee a college education to anyone with my hard-earned tax dollars?
Now take out that "college" part and wonder why you're allowing public schools at all.
I was very fortunate -- I went to university in Canada, where university tuition is lower. The tuition for my last semester (four months, Winter '82) broke $1,000 for the first time. My parents had also taken out a Registered Education Savings Plan for me, which kicked in, I think, $800 for the last three years of my four year degree. And I had my Co-op work terms. With all that, I still needed a loan (it was around $2,500) to get me through the last year (OK, some of that may have paid for the month's vacation I took after finishing school).
I paid $500 of the loan off in my first six months after school, then a few months after that, received a notice that they'd start charging interest if the loan wasn't paid off in full by the first anniversary. I was earning $22,000 annually, but my expenses were low, so I managed to make four monthly payments of $550 per month to get it all paid off.
It didn't occur to my to skip out on the loan, although it was a relatively small amount. The only other loan I'd taken out was for a motorcycle -- four $400 payments -- and dodging those payments didn't occur to me either. I'd borrowed money, I had to pay it back.
I think the writer of TFA is in denial. They need to mend fences and start paying off the loan. You borrowed some money and promised to pay it back. Yes, it's inconvenient, but it's the responsible thing to do. Grow up.
Because I'm a victim
------ The best brain training is now totally free : )
"Years later, I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school."
You want to be a writer but you can not pay off the debt you created getting a doctorate?
Really? You want into to debt getting a Phd in Philosophy?
Sorry but a lot of people have to take jobs they do not want to pay of debt or even to feed a family. You decided to spend a lot of borrowed money getting a degree and a Phd in a subject that does not pay well at all.
"Maybe the problem was that I had reached beyond my lower-middle-class origins and taken out loans to attend a small private college to begin with. "
Well yes it is. State schools are a lot cheaper and community colleges even cheaper. Get your required course out of the way on the cheap and then move on to University.
" I thought I deserved better, and naïvely tried to turn myself into a professional reader and writer on my own, without a college degree."
Talk about a sense of entitlement. You did not try to turn yourself into a anything on your own. You tried to use other people's money to live a fantasy. Who needs to pay a "professional reader". Wow. I just do not know what to say except pay up dead beat.
Wow this does so much harm to the idea of student loan reform that it almost seems like a right wing plant.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
He's 58 years old, if he had an MS in EE he would have made enough money to pay off his student loans 30 years ago. He's a societal leech who denigrates people who sell shoes to make a living or have to work hard every day to put a meal on the table.
Whether it is Texas A&M, MIT, CalTech or smaller schools like Oregon Inst. of Technology, get a degree where their graduates have high rates of employment within 6 months of graduation.
OIT claims to have 90+ % of graduates with full time jobs within 6 months of graduation. Lots of their graduates have job offers before they leave school.
If a student wants to "dabble" in the soft sciences, like History and Sociology and Psychology, do it at night school after you have a job!
... where I thank god that I live in Germany. An abundance of colleges to choose from, all for free (except some trivial Semester fee that's well below 200 Euros that gets you rebated admittance to public events, a free public transport ticket and some other niceys along with it).
Fucking dig this: You actually *save* money if you are a student over here - even as a part-time student!! I'd pay less healthcare as a freelancer with cheap student rates (look up "healthcare" on wikipedia if you're from the US. ... SCNR) and my PT ticket is cheaper!
This is also one of the reasons I'm gonna get off my lazy ass and start a college CS track this year - it would be an insane freakin' waste not to. Just finished mit GED A-Levels with prime scores btw. for exactly that reason.
Tip from across the pond: You guys should help Lessig get through with his Superpac initiative and then redo some core parameters of your system - it's broken at to many places.
My 2 eurocents.
We suffer more in our imagination than in reality. - Seneca
Funny how when a corporation defaults on its debt and files for bankruptcy so that it can break union contracts and pay workers less, it's seen as a sharp business move, a recognition that their expenditures have come to surpass their income in a structural and unsustainable way. But when an individual decides the same, perhaps after coming to the conclusion that an investment in a home or university education wasn't as lucrative as it seemed it would be at the time, people start thundering about the moral necessity of paying back loans.
What's your next trick, pawning a bunch of your stuff (since no one will ever give you another credit-based loan again), never paying the interest, then bitching online about how the people at the pawn shop are thieves because they sold "your" stuff?
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Regardless of what has happened to social mobility in the last 30 years, it hasn't affected the author of this article because he is 57 years old. He went to college in the 80's when college was not nearly as expensive. I went to college at the turn of the century and even then it was cheap enough you could pay over half of your college expenses by working part time at minimum wage.
This guy is simply a sociopathic asshole who is just being provocative to get page views. He stopped paying his bills because he is an entitled prick, not because of the federal loan apparatus he is complaining about in the article. I have real sympathy for the problems younger millenials are having because of the rising price of college, and it is shameful for this author to exploit them like this.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school.
Oh, gods, the horror! Taking a job you don't want so you can live? The poor, wretched victim!
I thought this guy was yet another "B.A. in basket weaving" millenial from this whinging. Color me gobsmacked: he was born in the fucking 50s.
Student loans need to be subject to bankruptcy just like any other loan and Gov loans need to be removed entirely and replaced with smaller amount grants. Grants as a compromise because progressives will never allow them to be simply be removed or reformed with reasonable controls and even if lowered it would only be a few years until the fed managed to make a mess of them again.
Taking out huge loans that you don't have a way to repay, to get a degree that has no potential for income, show a serious lack of judgement. Military service will fund education, often while drawing full pay. A trade certification from a community college would lead to a stable income that could be used to fund an indulgence degree like Philosophy. It would also allow you to eat after getting the degree, which is the big problem.
There are plenty of degree programs where the student loan problem is a real issue. Philosophy isn't one of those. If you don't have a trust fund or a rich spouse to support you, don't get it.
Easy Online Role Playing Campaign Management
Until 1987 or so, the cost of college in Texas was extremely low. I was very frugal and my entire expenditures for tuition, room and board from Sept 1981 to Sept 1982 was $2500. At the time minimum wage was $3.35. A person could work a part time job (15 hours a week) and pay for this. I'll bet that most of the tuition collected by the University of Texas at the time was directly from the students or the student's parents with grants and scholarships coming next and student loans running a distant fourth. As the government made student loans more available in order to make college more available the government accomplished the opposite of the desired effect because the government ignored basic economics. Making more money available affects spending at the universities which affects costs. Universities are money spending machines. The University of Texas now has more than double improved square footage that it had in 1981. The buildings are nicer too. But the size of the student body has not increased proportionately. The university simply spends more on building and maintenance. Far more than it spends actually delivering an education. Under the current system your hard earned tax dollars are going to build monuments rather being effectively used to educate. We had a system that did the opposite quite effectively and we could have that again. Instead of being cheap with your tax dollars you should be angry with how they are being spent now.
I can't blame the universities for the mess the higher education system is in. They're just responding to market forces. Really, everybody is. It's just that the market has been circumvented by a well-meaning government.
The problem is that unlimited money is flowing into the higher educational system and there is no negative feedback loop to limit it. It's just one big positive feedback loop driving up attendance and cost.
1) Take as a given that "you have to go to college or else you'll have a shitty job." More on this later. The number of students going to college has been steadily increasing since forever. Part of this is because of the nature of our increasingly specialized and technical world, and partly due to social changes, like the progress made by women and minorities. I'm not in any way implying that's bad, I'm just saying there are more people going to school.
2) The government first issued direct loans to poor students in 1958. This method upset congress, though, because from a budgetary standpoint it showed as a loss the year the loan was issued, even though it would be paid back later. Instead, from 1965-2010, the government guaranteed student loans made by private lenders. If the student defaulted, the government would make the lender whole. This makes the rule that student loan debt cannot be discharged by bankruptcy especially petty. The lenders were at no risk, anyway. From 1993 on the government also issued loans directly. Also, as time has gone on, loans have become increasingly easy to obtain. Originally only poor students who could show financial need qualified for government-backed loans, but those requirements were dropped in the 80s.
3) Since there is no risk to the private lender, there is no incentive not to grant any loan request. As for government loans, there's no political will to deny students seeking money for education. So, there's no brake on the money flowing into the system. And the lenders aren't necessarily doing anything wrong here. There have been some scandals involving kickbacks to schools, but it's mostly unnecessary as people are lining up for these loans. Why would the lender say no? They'd just get called out for ruining some kid's dream of an education.
4) If the lender had to take a risk, they would be careful about issuing loans. Today a D student seeking a degree that might land him a $30k/year job (if he's lucky) can get a loan for $40k. With risk involved, the lender would consult actuarial tables. What are the student's chances of completing the degree? What are his chances of getting a job? What's his expected income? What's the chance of default? No such brake exists. (Note, I'm not saying degrees not tied to a high-paying job are worthless. More on this later).
5) Without the loan, the D student would go learn a trade, instead, or get a job that doesn't require a degree, like say work in a call center (yes, I'm aware of the current situation in which ads for low-level jobs like call center work have starting requiring degrees. It's part of the loop and I'll get to it later). A student seeking a degree that costs more than what's reasonable given their earning potential would also be turned away (this would be an incentive to keep tuition costs down. If liberal arts students can't get loans, your school doesn't get their money).
6) Since the number of students and amount of money they can borrow is unbounded, there's no incentive to keep tuition costs down.
7) How are students with options deciding what school to attend? We would hope they would decide based on the quality of the education, but that's difficult to measure objectively. Generally it just has to be "good." Also, many students don't know what they want to major in when they arrive, anyway, so it's difficult to make a decision based on the quality of a program. As long as they're reasonably confident in the quality of the education, they're making their decision based on amenities. How nice are the dorms? The recreational facilities? How pretty is the
We don't have a state-run media we have a media-run state.
he writes for the NY Times, lives in the same town where Tony Soprano lived in a home most likely worth over $1 million, sends his kids to some of the best public schools in the USA and doesn't want to pay back the loans that paid for the education that got him here.
i might have to restructure my loans with my wife and do the same thing and let you suckers pay them off
The major problem with student loans is that there is no longer any escape from them. Bankruptcy does not discharge them. You're stuck with them for life.
That is a major departure from traditional debt laws, and this is just wrong. People should be able to escape their mistakes after appropriate penalties.
A student, 18 years in age, cannot comprehend the gravity of the loans they are taking out. The whole situation is rotten: you are told that you MUST get a college degree, otherwise you will be a lifelong failure. You are told that IF you get a college degree, your future WILL be rosy and bright. You are told that ONCE you get a college degree, you WILL get a good job and then paying the loan off will be no problem.
That is the extent of your knowledge when you are 18. You have no idea how much your salary will be in four years, in fact, when you are 18, it is very likely you don't even know how much your parents make, or how much anyone makes beyond your knowledge of minimum wage. All you know is that you have to go to college and get that degree so you can get a good job. At least that is what my parents told me, and when I was in college, that is the same set of assumptions that everyone was operating under.
And once you get that degree and you can't get a job in your chosen field of study, or maybe you don't even get that degree (because a lot of people don't make it through college - many college programs, particularly engineering, are actually DESIGNED to weed people out), then you are sitting there with a stack of loans and no way to reasonably pay them off.
Prior to 2001, you could try to pay them for a while, but after finding that you were getting deeper and deeper in debt, you could take a deep breath, assess your situation, and then take your lumps in the form of bankruptcy - knowing that you would have a finite period of time in which you would be penalized by a bad credit rating. But at some point it would be over.
In 2001, congress changed the law to eliminate the discharge of student loans from bankruptcy. Any other financial failure is redeemable, but a decision that you made when you are 18 years old, a failure that is not easily foreseeable (because people don't know their capacity, people don't know their future earning potential, people don't know what the job market is going to do), is not forgivable. Never, until the day you die, and even then, your estate will be on the hook for them.
And the loan companies are given extraordinary power, backed by the government, to collect their debts. Hey, if someone owes me money, I can't attach someone's tax returns - but student loan companies can do this. It is also very hard for me to garnish someone's wages to collect a debt because there is always the threat that the person will file bankruptcy. The lack of that threat here gives student loans extraordinary power.
That is the problem here, and it will take people like Lee Siegel, doing what he did, to bring this to the forefront of discussion. Certainly any abuse of the student loan process should be curbed, but an iron shackle on everyone is not the right response to any potential abuse.
"It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college."
The implication is that going to college can never involve "reckless borrowing and spending," but it can. He went into debt from buying lots of books and paying lots of people to give him lessons about them -- and he never had a plan for paying the money back. This is not economically different from spending your money on other things that you find pleasurable, such as booze and fast cars. Going to college can be reckless borrowing and spending, if you are reckless in your choices.
There is an argument for subsidizing higher education because it yields positive externalities, and that is his best argument. He makes it in a silly way, opposing choices between a high-paying job he didn't want, and a low-paying job he did want. He is basing his choices on his personal preferences, and again making himself seem reckless -- as if he had spent his time on booze and cars because that's what he "wanted." Instead, he could argue that his worth to society is not correlated with his income because he creates positive externalities, and therefore he should be subsidized. This is basically saying that our economic system is seriously broken in its incentives. This is a reasonable argument, but it requires a more nuanced analysis than saying "Everyone do what you like and to hell with everything!"
His arguments could be used to justify reckless spending on anything. In order to justify subsidizing higher education in particular, he would need to make a more careful analysis of incentives and benefits. Such arguments have been made very successfully, but not by him.
I already read this story and a bunch of comments on it, when it was shared on a friend's Facebook feed over the weekend. When I saw it here this morning, I have to admit I suspected a lot of people would try to make arguments supporting the guy's decision. (Lots of college age folks on here, after all, presumably suffering with high tuition and challenges finding good paying jobs, fresh out of school. Also a lot of liberal thinkers on here who I imagined would be all for free, govt. funded college educations.)
But no ... I see overwhelming dissatisfaction with his article, which IMO is exactly how it should be!
If nothing else, it strikes me that early on in his article, he encourages others to consider refusing to pay what they owe, just like he did. Yet he goes on to explain his circumstances, which are probably a lot different than many students are in right now. First off, he's talking about his dad going bankrupt after his mom co-signed for his loan. An awful lot of students I know received Federal loan assistance that didn't require a co-signer at all (and actually have pretty low interest rates compared to any other unsecured bank loans you'd take out). If you go in and sign for one of those, you have nobody to blame but yourself if it turns out it's difficult to pay off afterwards! You can't really argue that your parent(s) drug you into the bank and pretty much told you to "get one of these" without you having much of a clue, as they signed along side you on the paperwork.
But second, yeah.... it's kind of tough to feel sympathy for this guy when he's complaining that paying down his loans was going to be so difficult a decision because it would require taking a job other than the one he preferred being in! Hello?! What about the college grads with PhDs in Physics who take a job at Burger King for a while, to pay the bills? You're going to discount their dedication to doing the right thing and paying what they agreed to pay in a written contract because YOU think it's better to ditch your personal responsibility if it means doing a job other than being a writer for a while? Guess what? If I was hiring for one of these career positions and had a candidate with a high level degree with work experience like that, I'd choose him/her over the candidate with nothing! It says things about the person's character and willing to follow through on what they commit to.
I got free college education. It wasn't at a small local college - it was at Cambridge, one of the top ten universities in the world. The government also gave me a "living stipend", enough for room and board in college and a tiny bit extra. Free college education continues in Scotland today, but has been abolished in England and Wales.
Government funding for education managed to keep prices low, maybe similar to how the NHS keeps healthcare costs lower than in the US. I never had to spend any money on money-mill textbooks because in most courses the lecturers provided us with notes, and where we needed books we just worked with them in the library.
I'm deeply grateful for it all. It feels crippling for young folks today that don't have wealthy parents, to have to start out their lives burdened by crippling debt. What an awful psychological burden for the next 20-30 years of their lives. How awful that they get turned into cogs in a corporate wheel where they have to grind through functional jobs to pay back that debt. How divisive that the children of rich kids are spared this.
I think it's a mark of civilization that we can educate our children and young adults, broaden their minds, give them a liberal arts background, let their creativity fly. So what if they learn poetry or philosophy or literature. So what if 90% of these educations we give them don't show a return-on-investment? I don't care. That's what society and civilization MEANS:
“I must study Politicks and War that my sons may have liberty to study Mathematicks and Philosophy. My sons ought to study mathematicks and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, musick, architecture, statuary, tapestry, and porcelaine.” John Adams, Letter to Abigail Adams, May 12, 1780.
(As for me? I'm now a software engineer. Through my professional work I've given back lots to society, making lots of developers more productive through my language design work. I gladly pay the top rate of taxes, and would gladly pay more. I asked the tax office how to donate higher levels of tax, and the person was very confused, went off for thirty minutes to get help from her supervisors, and ultimately told me it was impossible. Every election, I always vote for the parties that will benefit the people worse off than me, at my own detriment, because that's how I think civilized people should behave. I've not seen a charity that manages to control overall education costs, or provide universal benefit, as well as the UK government did through taxes.)
Just FYI, purposely transferring your debt to a credit card in order to discharge the debt in bankruptcy is fraud. Which is a criminal offense. I know it's asking a lot but think your cunning plan all the way through kids.
I came to the datacenter drunk with a fake ID, don't you want to be just like me?
The writer describes the student loan process as being "legal but not moral". Considering when he got his student loan, and how he got it, I don't understand his perception of the loan as being "not moral". I took out my first student loan about 40 years after he did, in 1984. That was a different time. College was not nearly as expensive, and paying back loans was not as difficult. All of my student loans together added up to about 40% of the annual income from my first job. These days, comparable loans would probably come to about 120% of the annual income of a first job. The first obligation is something that could be satisfied in a few years. The latter, modern obligation might well never be satisfied. One might argue that the modern system, with towering loans to complete useless degree programs is immoral, but that was not the situation 40 years ago, or even 30 years ago.
What is immoral is not paying back what you borrowed. A couple of his suggestions for handling the situation are totally outrageous, most notably, that one should marry someone who has a good credit rating. Really? His life philosophy is to burden someone else with the consequences of his bad decisions?
Proverbs 21:19
The housing bubble that started in 2005 resulted in my purchasing a rental property precisely at the height of the market. I had to, it was part of a deal. So when the bubble burst, the market value went to about 40% of loan balance in 2008, and stayed there until 2012.
I didn't 'walk away'. I endured countless calls from the lender's 'home retention team', or 'home affordability team', or whoever if they, THEY, processed my payment either on due date or mere hours later. They were deathly afraid I would do the rational thing and walk away.
But the property had positive cash from from day one. It made business sense for me to keep it. As of this year, it has equity value. Not much, but that's pretty good.
As an aside, I could have bought the neighboring property for $50k in 2011, which at that time was really fair market value. Same layout, a mirror image, but it needed a new roof, major remodels inside, and had no tenants. It looked like 30% down (commercial loan for income property), $30k of work, about $45K cash to buy and rent out a $50k property. Not very attractive.
But back to the story, I rented to one man who bought a home in early 2005, escaped most of the bubble here, but had a 3-year ARM that drove his payment from $1,500/mo to $3,800/mo. He walked way when it adjusted. No bank could fix this in 2008, for obvious reasons, and he also was working in commercial construction, which dried up. His income plummeted, and he eventually could not even pay rent.
'Lots' of people I know walked way from mortgages that far exceeded property value. It was a business decision, prompted by both buying at inflated prices, the subsequent collapse of the market, many had ARMs that went sky-high, combined with post-2008 layoffs, credit card debt that forced them into bankruptcy, and in many cases their being given a loan for over-priced homes appraised by unscrupulous appraisers in collusion with mortgage bankers and realtors. Yes, Realtors.
For a graduate who chose a major with no job prospects, and no ability to find alternative work that can pay the bills, default may make sense. If these defaults impact certain institutions more than others, perhaps we will see market pricing for either student loans or for programs. Let me explain:
If defaults occur for certain institutions, a market pricing approach would raise interest rates for those schools that suffer more defaults. This is bound to impact enrollment for some of these.
However, if defaults impact certain majors (philosophy and art being favorite examples), perhaps then lenders inquire about the student's course of study, and price it according to experience.
There are several possible outcomes to these actions:
- Some institutions may lower tuition. Unlikely at first, but if enrollment suffers because students can't finance their tuition, they may adjust.
- Some majors may become so unpopular that tuition has to drop. Maybe.
- Lenders may be asking more questions of students - job prospects, ability to pay, blah blah.
- The government may, just may, get out of the business
Consider this. In 2005, mortgage lenders started making loans that were literally indefensible. NINJA loans, Sallie May and Freddie Mac underwriting loans with dubious or nonexistent documentation, inflated values, collusion that is obvious in hindsight. Easy money that resulted in defaults when the real estate market corrected, and the economic downturn forced borrowers to make hard choices. Many 'walked way'. Now, five years later for the last of those, they find that they can in fact get a loan - the banks figured this out. Tighter requirements now for sure, but more like normal for the long-term market.
Now we have the federal government underwriting student loans for tuition that is increasing much faster than the CPI, with less value than ever, and borrowers have limited prospects for repaying these loans. Schools claim they offer value, but even seemingly good bets like MBAs and engin
deleting the extra space after periods so i can stay relevant, yeah.
On my dime actually....
Who pays when the banks get stuck with this bad debt? It's customers and share holders. Who are these people? Why it's you and me of course. Don't be fooled into thinking it's some big evil corporation that's getting fleeced, it's really you and I who he defaulted on. And that's a bad thing overall.
Where this guy will pay for having NO CREDIT for the next 10 years at least.... I'm not so sure the time for the crime is long enough, but what are you doing to do? He DID pay back his loans, legally, though I'm pretty tired of bailing out the irresponsible because I happen to be responsible and pay my debts, I have to hand it to him, that was clever.
But I rest assured that if this idea of his becomes common practice, it will quickly be brought to an end. Credit card companies will simply start looking at student loans as *bad* marks on your credit, and all of you who came out of college saddled with huge debt, will be paying. You will have lower credit ratings and pay higher rates. The amounts you can borrow will be less, and you will pay more. And it's dolts like this guy who will be to blame.
"File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
Going to college in 1980s, doing some work here and there, borrowed $5K of student loans but after graduating I only had to pay off that 5K (it seemed like it took forever). I also remembered how difficult it was to get a credit card which was frustrating but looking back it prevented me from going crazy with spending.
To get a credit card you need a credit history. Credit history is data on TRW showing your credit card history. How in the hell do you get that? I remember graduating but banks would not give me a credit card because I'm not on the TRW database. OK maybe some of you are laughing at me because I didn't know how to game the system but I knew many others in my situation. One friend said I should begin buying a mattress as they give credit to anyone. Then after two years pay it off and hope that payment history is in the TRW database (yes, very common then but they've become unknown history like Soviet Union).
Eventually after two years after moving and transferring my bank account, they asked if I had a credit card which I said no because I'm not on TRW (and I never got around to buying a mattress). Lady said my employment history is good and if my application is denied then I should then see her and she will make sure it gets approved.
Fast forward to 1990s and things sure changed a lot. Tons and tons of easy credit card applications flood mailbox. I had some debt as I had to borrow money to pay for a car I smashed into. I ask the bank guy, "why do they keep sending this stuff to me when I'm already in debt?" He ran some numbers and said I can easily borrow $80K on a simple signature loan (damn, with interest I will be an old man before I pay that off). And also fees for colleges skyrocketed especially for those with 4-year degrees wanting to attend classes to keep up with technology or simply needed new skills to get a new job (many lied on their applications to avoid paying huge fees).
Continuing on with my gripe (spoiler: not much about student loans), also in 1990s it became much more easy to get mortgage loans. Before you had to have a good down payment and a sufficient salary as loan offices do calculations knowing you will need to spend significant amount on general expenses. I remember struggling to get a condo but sometimes meet people that were able to game the system and borrow a lot more than what they qualified for a house (i.e. they earn $2K a month and mortgage payments are $2.2K per month). Somehow they were able to move money around with various investments and eventually be able to pay off the house in 10 years. I see these kind of people really smart on how to do stuff like this. But later when banks made it easy for others to do this, that is when many got into trouble because they did not have the smarts to handle this type of financing. I certainly don't and I remember in late 1990s a friend said I should meet this mortgage broker that can do a really nice refinancing giving lots of extra money to buy a house. After he ran the numbers, I saw I only had about $150 take home per month that had to cover everything else besides the mortgage payment. Good thing I chickened out and not become one of the masses dumped on the streets after dot com bust.
Oh, yes I did get a mattress when I got a credit card.
mfwright@batnet.com
If we just got rid of Sally Mea and college loans need to be secured with some kind of collateral or simply small enough lender were willing to fork over on credit history alone, the problem would solve it self.
The problem with this, and to some extent student loans in general, is that now you are selecting university students based on wealth and not merit. If you don't have enough collateral to secure the loan - or your parents are not willing to take the risk - then you do not get to go to university no matter how intelligent you are. Society then not only potentially loses out on the next Einstein but also it also becomes less fair leading to all sorts of problems with social unrest.
There is also another issue which the UK is now facing having introduced massive tuition hikes and an increase in loans. Some essential jobs which require a university degree, like teaching, are suddenly experiencing a huge shortfall in new graduates. The reason is that a teachers salary takes decades to repay a large loan while someone going into finance can repay it in a matter of years.
This is why university education should be funded by taxes and the funded positions awarded to the best and brightest. Those who earn more will pay more for their degree through taxes while those whose earn less will pay less. The alternative is that society will need to start paying e.g. teachers a whole lot more money in order to attract sufficient numbers and to do that it will have to raise taxes so ultimately everyone will be paying anyway but in the meantime the affected professions will be in severe trouble.
The price of a college education -- let's just say 4-year bachelor's degree -- isn't the problem. Rather, it is a symptom of both the ability to get a large student loan, and desire for a traditional, 4-year degree.
As an analog, consider the housing market: The value of a house is what someone is willing to pay for it, and what someone is willing to pay for it is a factor of their assumption about its future value and their ability to fund the purchase with money they don't already have.
No, not all homes are equal, nor are school tuition rates. There are a relatively small number of multi-million dollar mansions, but apartments and inexpensive homes are plentiful.
The article is more like someone complaining that a Ferrari is expensive and refusing to consider the thousands of other lower-cost options.
Too many people look at costs of a single school. There are a huge number of schools, Wikipedia saying 4,726 in the US. The median cost of schooling across all schools is $5,832 per year, which is quite reasonable. Half of them cost $5,853 per yer or less. Yet the mean is $23,874 per year. Assuming you are comfortable with statistics, those two numbers mean the bulk of schools are inexpensive, and a small number of hugely expensive schools cause the average cost to skew quite high. As a parallel, it is like a middle-class neighborhood with a small number of billionaires who moved in; those few high-value individuals will dramatically shift the average wealth in a neighborhood to so the "average wealth" means everyone is a millionaire even though nearly everyone is middle class. The median cost of higher education is reasonable. Just be smart and pick a school you can afford.
Locally, my kids can go to one of several good junior colleges nearby which all cost about $1500 per semester, then move on to one of the several state universities that cost around $3500-$4000 per semester. So about $25,000 total for the four years of education. I note that for my region at least, Wikipedia lists 11 inexpensive 2-year colleges and seven state universities, all within commuting distance. Or my kids can go to one of the local private for-profit schools the whole time. One popular private school charges just shy of $20,000 per semester. That is, one semester of the expensive (but heavily marketed and popular) for-profit private school is the same rate as a full four year degree elsewhere.
I look at the author of the article, Lee Siegel, that Wikipedia says attended Columbia University. That school is a private ivy-league school currently and charges $51,008 per year. We could get two students all the way through their bachelors degrees with the funding for a single year at that school. And he went there for probably seven years. So he probably was committed to roughly $350,000 in costs when he could have chosen a similar education at one tenth the cost or less.
So really, this is is not so much a complaint about the cost of schooling generally. He is complaining that everyone should have a Ferrari they cannot afford, even though for most people one tenth or less the cost, getting a Prius or Accord or Corolla is both affordable and adequate.
//TODO: Think of witty sig statement
If people groaning under the weight of student loans simply said, 'Enough,' then all the pieties about debt that have become absorbed into all the pieties about higher education might be brought into alignment with reality. Instead of guaranteeing loans, the government would have to guarantee a college education."
The USA provides education K-12, normally paid for by local taxes but increasingly being federally subsidized; but beyond that nothing is nor should be guaranteed.
The real problem, in this respect, is employers requiring a college level or higher degree where one is not really necessary. Yes, it's useful to help weed-out candidates, but it may also cost some really good potential employees. If students refused to play the "degree game", then colleges/etc would be forced to lower tuitions, and businesses would be forced to consider more people without degrees, and more people would get put to work.
Of course, you'd then also have a number of companies complaining that they can't get qualified workers so the H1-B visa program should be expanded...which is why this really all comes down to how do you properly help a free market regulate itself to encourage the employment qualifications that avoid all the above issues?
Not an easy question to resolve. But guaranteeing a college education will not resolve it, only make it worse as a college level education will simply become the new High School Diploma.
Truth is like the sun. You can shut it out for a time, but it ain't goin' away. - Elvis Presley (source: imdb.com)
When buddy chose to sign up for the student loans, he obviously didn't spend 1 second thinking about how he was going to pay them back. His strategy was to study whatever made him happy, borrow as much money as that required, and hope that when he graduated he would land a high paying job in his chosen field. I see no sign that he ever asked himself what the starting salary in that field was, how long it would take to get to his high paying job, and based on those facts determine how long he would take to pay his loans. Now he wants to walk away from his bad decision, (which he could likely have figured out was a bad decision before he took on a penny of debt), he wants you and me to pay for it instead, and he wants to justify it to himself so that he doesn't have to feel guilty. He gets zero sympathy from me.
None of them can see the clouds; The polished wings don't care.