25 years old and deep in debt

[garbon]

Once you get your first job, where you went to school in most cases doesn't mean a damn thing anymore - what matters is how you perform and what you can do.

Well of course but we're talking about getting those first "real" jobs and the perceptions that a lot of 20-somethings have at the moment.

The idea that you MUST go to some elite and private university to succeed is largely bullshit.

If that's what it sounded like, I'm sorry as that's not what I meant. It's more akin to what Otto said about the previous notion that going to college = good job which is less of a tenable notion today.

[garbon]

To rephrase, what people expect are fucking jobs commensurate with their education level and their debt level.  They ain't getting them.  And it can be argued that they're pretty dumb for getting degrees that have negative returns on investment.  Fine, but 18-22 year olds are known for being pretty dumb.  Do we really want a society that rewards educators and lenders for preying on the stupidest parts of our society?  Do we want a society where the government helps them do it?

Because that's where we're at now.

I'd agree though I'd suggest that the solution isn't having the government step in, at least not in a regulatory fashion, but rather a re-adjustment on thinking/learning about finances while in K-12. Because after all, college loans aren't the only type of financial mistakes that people make.

[Berkut]

To rephrase, what people expect are fucking jobs commensurate with their education level and their debt level.  They ain't getting them.  And it can be argued that they're pretty dumb for getting degrees that have negative returns on investment.  Fine, but 18-22 year olds are known for being pretty dumb.  Do we really want a society that rewards educators and lenders for preying on the stupidest parts of our society?  Do we want a society where the government helps them do it?

Because that's where we're at now.

I'd agree though I'd suggest that the solution isn't having the government step in, at least not in a regulatory fashion, but rather a re-adjustment on thinking/learning about finances while in K-12. Because after all, college loans aren't the only type of financial mistakes that people make.

The problem we have now is largely a function of the government stepping in in the first place, creating the guanranteed student loan program, which has had the entirely predictable effect of driving tuition prices through the roof while at the same time giving access to insane amounts of lending to people who have no need to show that they actually have a real need for it or can pay it back.

It is ironic that those complaining about this now are almost certainly the same people or the same type of thinking that in the past said "Hey, it isn't right that some people cannot afford elite universities! The government ought to guarantee their ability to borrow any amount of money necessary to pay for any school they might wish to attend! It is the only fair thing to do!".

Well, now they have their more fair system, and the result has been a disaster from an economic standpoint. Year over year constant double digit increases in the cost of attending universities as schools do their best to grab as much of that sweet government cash possible, and the "consumer" once again detached from the immediate consequences of their purchasing decisions, and we all act shocked, SHOCKED I SAY! that a bunch of them make bad choices and the cost for everyone goes through the roof.

[Berkut]

To rephrase, what people expect are fucking jobs commensurate with their education level and their debt level.  They ain't getting them.  And it can be argued that they're pretty dumb for getting degrees that have negative returns on investment.  Fine, but 18-22 year olds are known for being pretty dumb.  Do we really want a society that rewards educators and lenders for preying on the stupidest parts of our society?  Do we want a society where the government helps them do it?

Because that's where we're at now.

I'd agree though I'd suggest that the solution isn't having the government step in, at least not in a regulatory fashion, but rather a re-adjustment on thinking/learning about finances while in K-12. Because after all, college loans aren't the only type of financial mistakes that people make.

On a different tack, I don't think the solution to any systemic problem like this is ever "Gosh, we should educate people more, so they don't do such dumb things!". That never works in any large group.

There is a much more fundamental problem here. The fact that schools can sustain year over year over year double digit price increases vastly greater than the rate of inflation indicates there is something broken in the basic funding model for higher education in the USA, and it isn't the ignorance of the people taking out student loans.

[garbon]

There is a much more fundamental problem here. The fact that schools can sustain year over year over year double digit price increases vastly greater than the rate of inflation indicates there is something broken in the basic funding model for higher education in the USA, and it isn't the ignorance of the people taking out student loans.

They can sustain it because people are willing to pay/take out loans.

[DGuller]

The fundamental problem with student loans is that you can't go through the bankruptcy process with them.  You can't liquidate someone's education after they already acquired it, so writing off the student debt during bankruptcy is like leaving someone with the house after they default on a mortgage.  On the other hand, having debts that can't be discharged is very damaging as well, because then you can literally create indentured servants for life.  It may be that government guarantees didn't explode this situation, but rather helped driving it to the inevitable and unsustainable conclusion faster that it would've gotten there normally.

One solution may be to have garnishment of a percentage of salaries of the graduates for X years after graduation, with the percentage determined by the price of the university and the fraction of tuition not paid for.  However, this solution has to be almost forced on everybody Obamacare-style, because otherwise you have adverse selection going on, with future social workers agreeing to garnishment, and future investment bankers taking out loans instead.

[Darth Wagtaros]

To rephrase, what people expect are fucking jobs commensurate with their education level and their debt level.  They ain't getting them.  And it can be argued that they're pretty dumb for getting degrees that have negative returns on investment.  Fine, but 18-22 year olds are known for being pretty dumb.  Do we really want a society that rewards educators and lenders for preying on the stupidest parts of our society?  Do we want a society where the government helps them do it?

Because that's where we're at now.

I'd agree though I'd suggest that the solution isn't having the government step in, at least not in a regulatory fashion, but rather a re-adjustment on thinking/learning about finances while in K-12. Because after all, college loans aren't the only type of financial mistakes that people make.

On a different tack, I don't think the solution to any systemic problem like this is ever "Gosh, we should educate people more, so they don't do such dumb things!". That never works in any large group.

There is a much more fundamental problem here. The fact that schools can sustain year over year over year double digit price increases vastly greater than the rate of inflation indicates there is something broken in the basic funding model for higher education in the USA, and it isn't the ignorance of the people taking out student loans.

Some of the more elite schools track tuition rates and increase theirs accordingly since the perception is, "more expensive = better". 

[Berkut]

There is a much more fundamental problem here. The fact that schools can sustain year over year over year double digit price increases vastly greater than the rate of inflation indicates there is something broken in the basic funding model for higher education in the USA, and it isn't the ignorance of the people taking out student loans.

They can sustain it because people are willing to pay/take out loans.

Yeah, but that is inevitable if you give enough people access to cash.

It is like blaming the mortgage meltdown on people who took out loans they could not afford. Sure, they should not do that, and if nobody did that there would not be a problem...but of course people WILL do that if you let them.

[Berkut]

The fundamental problem with student loans is that you can't go through the bankruptcy process with them.  You can't liquidate someone's education after they already acquired it, so writing off the student debt during bankruptcy is like leaving someone with the house after they default on a mortgage.  On the other hand, having debts that can't be discharged is very damaging as well, because then you can literally create indentured servants for life.  It may be that government guarantees didn't explode this situation, but rather helped driving it to the inevitable and unsustainable conclusion faster that it would've gotten there normally.

One solution may be to have garnishment of a percentage of salaries of the graduates for X years after graduation, with the percentage determined by the price of the university and the fraction of tuition not paid for.  However, this solution has to be almost forced on everybody Obamacare-style, because otherwise you have adverse selection going on, with future social workers agreeing to garnishment, and future investment bankers taking out loans instead.

A better solution would be to cap student loans at some amount driven by the cost of attending a public, mid-level school.

You can borrow enough to attend a decent university, but you cannot borrow enough to go to Xavier.

Still has the problem that those mid level schools will just keep on increasing their tuition though in order to get more and more cash.

[OttoVonBismarck]

If you are serious about going into academia or want to be a big shot at a big law firm, that's basically the only career where undergraduate degree really matters.

Gosh I hope not or I am going to be really sad once I finish my engineering degree.

Are you going into crushing debt to be an engineer? I know many engineers that graduated from relatively unknown schools and make more than the average compensation for engineers. Unless you're wanting to work for a small cadre of employers in highly specialized fields of engineering (like going aerospace because you want to work for NASA) then there is no reason to bankrupt yourself to go to MIT. Now if you can go to MIT affordably through scholarships or whatever, that's fine. But there is little evidence that for people just wanting to enter industry a Top 10 Engineering school is worth going into massive debt over.

[OttoVonBismarck]

And I mean "massive debt over and beyond average engineering school debt." If you're going to a good school and aren't doing that, there is no problem.

[garbon]

Yeah, but that is inevitable if you give enough people access to cash.

It is like blaming the mortgage meltdown on people who took out loans they could not afford. Sure, they should not do that, and if nobody did that there would not be a problem...but of course people WILL do that if you let them.

I guess though I still think a bit of that is getting people to actually understand what they are getting into.  I doubt many students entering into students loans are having serious discussions about how said loans will crush them after school.  Clearly the writer of this article wasn't very aware and she's from all accounts a fairly bright girl.

Besides not everyone has insane students loans like what has been discussed here.  So what is it about the groups of people that don't have much parental financing that manage to get done with school without owing 200k? What is it about those individuals that make them so different?

[Berkut]

If you are serious about going into academia or want to be a big shot at a big law firm, that's basically the only career where undergraduate degree really matters.

Gosh I hope not or I am going to be really sad once I finish my engineering degree.

Are you going into crushing debt to be an engineer? I know many engineers that graduated from relatively unknown schools and make more than the average compensation for engineers. Unless you're wanting to work for a small cadre of employers in highly specialized fields of engineering (like going aerospace because you want to work for NASA) then there is no reason to bankrupt yourself to go to MIT. Now if you can go to MIT affordably through scholarships or whatever, that's fine. But there is little evidence that for people just wanting to enter industry a Top 10 Engineering school is worth going into massive debt over.

Bingo.

My degree is from the University of Arizona. Not a bad Comp Sci school, but hardly anything nationally recognized.

Would I have been better off with a degree from Stanford or Cal? Only if I wanted to go into academia or something like that. Even then, it isn't that important unless I want to go into academia at an elite school.

If you want to work in industry, it largely does not matter as long as it is a decent school.

[CountDeMoney]

Still has the problem that those mid level schools will just keep on increasing their tuition though in order to get more and more cash.

You forgot to add "to offset the budget cuts from state governments".

O'Malley slashed over $5 million from the state university system budget as well as removing an additional $5 million from their reserve funds;  they're upping tuition by 3% to stay inline with COLA increase, but are really passing the savings on to out-of-state student applications with the tuition increase.  I think that's going to start happening more often, hitting out-of-state applications for the real tuition increases.

[OttoVonBismarck]

On a different tack, I don't think the solution to any systemic problem like this is ever "Gosh, we should educate people more, so they don't do such dumb things!". That never works in any large group.

There is a much more fundamental problem here. The fact that schools can sustain year over year over year double digit price increases vastly greater than the rate of inflation indicates there is something broken in the basic funding model for higher education in the USA, and it isn't the ignorance of the people taking out student loans.

Education is the job of parents and that is what I believe more parents should do. I do not believe parents (and to a lesser degree school guidance counselors and educators) have kept up with the changes in college. I still talk to people my age who are dumbfounded college at some in state schools might cost $17k+ a year, because just in 1990 (around the time I was at that age...although my education was fully taxpayer financed) it might have been $2500 a year or less. People from our generation simply are largely ignorant of the changes in education and the job market and have failed in advising their children appropriately.

But that being said, from a regulatory standpoint you are absolutely correct. The problem with FAFSA is its award is basically [Cost of Attendance] - [Expected Family Contribution]. That COA figure is basically fully variable and to a degree FAFSA essentially "allows" the school financial aid office to report how much the student's costs will be. There is little in terms of reigning in the spiraling costs. Instead, FAFSA awards should be based on a national average tuition (or some figure) and that figure should only be allowed to increase either at the rate of inflation or slightly higher. The difference between that figure and the actual cost of attendance will have to be covered by:

1. PLUS Loans (These loans are taken out by the parent and are based on the parent's creditworthiness and are the sole responsibility of the parent.)
2. Private Student Loans - But these loans should be treated the same as any personal, unsecured debt. Which means lenders will issue a hell of a lot less of them, require creditworthy cosigners, and will in general pony up far less cash.

Only then will the free market primarily take over and people start looking at what they can actually afford in regard to college.