It's time to face facts.
It's time to face facts.
No. It's a little different.
You take out a mortgage based on the money you are making now. This is a known.
You take out a college loan based on money you expect to be making in the future. This is an unknown.
Your current income is a fact.
Your future income is not a fact. It's a hypothetical.
So - it's time to face realistic probabilities?
Not as catchy.
The parallels are eery.
The gov/fed kept interest rates at rock bottom-lows to make home ownership more affordable and now there is a debate about keeping interest rates on Stafford loans "reasonable" (ie. below what the market would serve).
I've seen much over-building on campuses as well, from high-rise, near-luxury dorms to state-of-the-art fitness centers. While this is all well and good, it represents a departure from the fundamentals of higher-education.
The income requirements of students is equal to no-doc, min-doc, or ninja (sub-prime) mortgage loans of '03-06. There is "potential" repayment capacity but a lot is being left to chance (not good banking - oh, wait that rights, its the government).
Guys - learn from the past or you are doomed to repeat it. State-intervention through direct and indirect means results in excessive speculation and eventual economic downturns.
With that said, the difference is scale. The student loan market will never reach the proportions of the residential mortgage market. So it will not derail the entire system but that doesn't mean it won't be a bump in the road. And a "bump" for those paying back the debt will equate to a financial struggle without necessitating TARP/bailouts.
Hope you went to school for something that makes money or you have rich parents/spouse.
So the OP is chiding about people taking out loans that they shouldn't and you are chiding about giving out loans that they shouldn't.
Looking at it from both ends.
Nothing wrong with that.
There surely seems to be a bubble that cannot be sustained.
Mortgages are secured loans, student loans in most cases are not. Big difference.
the market would not bear much in the way of student loans at all because they are large, unsecured loans to young people with no income or credit history. Without government interference in the student loan "market" college education would simply revert to what it used to be, a self perpetuating privilege of rich people.
trance dance turn in shawowski wrote:
The parallels are eery.
The gov/fed kept interest rates at rock bottom-lows to make home ownership more affordable and now there is a debate about keeping interest rates on Stafford loans "reasonable" (ie. below what the market would serve).
I've seen much over-building on campuses as well, from high-rise, near-luxury dorms to state-of-the-art fitness centers. While this is all well and good, it represents a departure from the fundamentals of higher-education.
The income requirements of students is equal to no-doc, min-doc, or ninja (sub-prime) mortgage loans of '03-06. There is "potential" repayment capacity but a lot is being left to chance (not good banking - oh, wait that rights, its the government).
Guys - learn from the past or you are doomed to repeat it. State-intervention through direct and indirect means results in excessive speculation and eventual economic downturns.
^ wrote:
So the OP is chiding about people taking out loans that they shouldn't and you are chiding about giving out loans that they shouldn't.
Looking at it from both ends.
Nothing wrong with that.
There surely seems to be a bubble that cannot be sustained.
I would say that there is nothing blatantly "wrong with that" at this moment but that doesn't mean we're not sowing the seeds of another [mini] crisis while still trying to escape the last.
By the same line of thought there was "nothing wrong with" putting people in houses they couldn't afford, right? Everyone deserves to own the own home, right?
"When idealized policy trumps economic thought, we all suffer." - me
Student loans can not be discharged through bankruptcy whereas mortgages can. So in a way, student loans are secured (to you!) though not technically.
voiceofreason wrote:
Mortgages are secured loans, student loans in most cases are not. Big difference.
dumb wrote:
the market would not bear much in the way of student loans at all because they are large, unsecured loans to young people with no income or credit history. Without government interference in the student loan "market" college education would simply revert to what it used to be, a self perpetuating privilege of rich people.
This is an interesting argument but I disagree.
1. a decrease in government subsidization of higher education would decrease the cost of a 4-year degree which would in part off-set anyone that can't afford it own their own (read: family/parents).
2. This isn't the 1950s. Thing would not "simply revert to what it used to be," as an unencumbered market would find a way to finance those with good repayment potential.
This might take the form of: "Oh, you're pursuing a degree in mechanical biology and have a good high school record: loan APPROVED. Oh, you had a lackluster h.s. record because you were rolling joints during shop class and you want to go to school for sports marketing because you like Entourage: loan REJECTED"
^the federal loan program doesn't care about stuff like this so there is overcapacity.
Have you stopped to ask yourself if everyone should go to a 4-year college...? We need to remove the stigma of vocational education and associate degrees.
Actually these two situations are completely different.
Mortgages are secured by the property they buy. If banks are doing proper due diligence, the risk of loan defaults is expected and something that can be managed. The housing bubble crisis was mainly caused by legislation that enabled a Ponzi scheme like environment for home loans, coupled with the wide scale process of banks and lending institutions replacing due diligence with creative ways to make bad loans.
Go to "google.com" and do a search on "student loan scam". When you read a few of those links, you will see that student loan lenders are already well protected by federal legislation. In case of loan defaults, the student does not escape the loan obligation, and the lenders have unusual power to drastically increase interest, charge penalties, and to garnish salary, income tax refunds, social security and disability payments.
All I said was that there was nothing wrong with looking at it from the borrowers AND the lenders perspective.
I do agree that a high volume of loans makes costs go up because it increases the numbers who can participate which increases demand.
And the increases in costs leads to more people needing loans to cover the costs.
And the cycle perpetuautes.
Somethings gotta give somehwere along the line.
Shut up Shawkoski!So China has 10% annual GDP while managing their economy and development and they're the ones screwing up?Just shaddup now, and stop flaunting your ignorance.By the way, it's spelled 'eerie' you freakin' Neanderthal.Gosh, I can't believe we're same species. It's so effin embarrassing.
trance dance turn in shawowski wrote:
The parallels are eery.
The gov/fed kept interest rates at rock bottom-lows to make home ownership more affordable and now there is a debate about keeping interest rates on Stafford loans "reasonable" (ie. below what the market would serve).
I've seen much over-building on campuses as well, from high-rise, near-luxury dorms to state-of-the-art fitness centers. While this is all well and good, it represents a departure from the fundamentals of higher-education.
The income requirements of students is equal to no-doc, min-doc, or ninja (sub-prime) mortgage loans of '03-06. There is "potential" repayment capacity but a lot is being left to chance (not good banking - oh, wait that rights, its the government).
Guys - learn from the past or you are doomed to repeat it. State-intervention through direct and indirect means results in excessive speculation and eventual economic downturns.
In the early 80s, a 4 year degree at a D1 State University, with in-state tuition cost $13,000-including dormitories/living expenses. An engineering graduate could expect to earn $25,000 to $30,000 out of the box. A brand new Jeep Wrangler back then cost about $11,000.
Today, the same education costs $70,000, and an engineering graduate can expect to earn about $50,000 out of the box. A brand new Jeep Wrangler costs about $25,000. Just like the housing market, easy financing has made tuition increase about twice the rate of inflation. There will come a point where the value of the education is broadly recognized as less than the earning power it provides. Either wages will have to go up, or tuition go down-or fewer people will go to college. I can only imagine how tough it is for people with less marketable degrees than engineering-or those that borrowed money to attend private institutions that cost $70,000 per year.
I had loans. They took 9 years to pay off. They were over 7% interest rate. I understand the rate now is 3.4%, and would jump to 6.8%.
Cry me a river.
Trance dance makes some very good points here.
One thing not (directly) mentioned here is the role of for-profit universities (U of Phoenix and the like). They are 1) accepting students who are often unqualified for acceptance to traditional universities, 2) promising gainful employment after graduation, but 3) offering mostly worthless degrees while 4) charging private school tuition. An inordinately high proportion of student loan defaults are coming from the for-profit sector.
I don't want to put all the blame on for-profits though. I'll give an example of the loan-as-economic-driver for the university: For a class that I teach, the school tried to get a THIRD book made mandatory for the class. We the faculty said no. It was not necessary. The rationale from the administration was that if the book was mandatory, the students could get the $150 approved as part of their loans. It makes me wonder how much other unnecessary stuff is made "mandatory" for students, thus unnecessarily driving up the loan amounts.
trance dance turn in shawowski wrote:
The parallels are eery.
The gov/fed kept interest rates at rock bottom-lows to make home ownership more affordable and now there is a debate about keeping interest rates on Stafford loans "reasonable" (ie. below what the market would serve).
I've seen much over-building on campuses as well, from high-rise, near-luxury dorms to state-of-the-art fitness centers. While this is all well and good, it represents a departure from the fundamentals of higher-education.
.
Yes the parallels of the student loan bubble are very eery. In both the housing bubble and student loan bubble the costs of Housing and education had accelerated far beyond the inflation rate. Houses were overpriced and now education is overpriced.
Why aren't politicians dragging university administrators before congress and grilling them about the overinflated costs of tuition? Why aren't university officials being held accountable for "price-gouging"?
You make an excellent point. My cousin works for Kaplan college as an admissions person. They sell their programs to people, even though admissions people know the prospective student cannot afford it. Many of these people are idiots who spend roughly $27,000/year to obtain a useless degree from a useless college.
I'll give you an example of tuition costs outpacing earning, inflation, faculty salaries, etc. In 2001, the physician assistant program in which I teach cost a little over 5000 per year for in-state tuition. In 2011, it cost over 18,000 for in-state tuition. This is just the tuition cost, not including books, clinical materials, living expenses, etc.
Here is an example of the sort of worthless crap companies like Kaplan are pushing:
Associate of Applied Science in Photographic Technology
According to the Department of Labor, employment of photographers is expected to increase about as fast as the average for all occupations through 2018.* What's more, as the population grows, the demand for portrait photographers should increase as well. Growth of Internet versions of magazines, journals, and newspapers also will require increasing numbers of commercial photographers to provide digital images. Photographers need both technical skills and creativity to produce effective photographs. Get the career training and education you need at Kaplan College.
They want you to spend near $30k to take some photography classes, and the outlook is terrible, no matter what their site says. In fact, the BLS site they link to claims that you don't even need anything higher than a HS diploma, median pay is $29,000 per year (you could make as much at McDonalds) working full time, and btw, the job market for photographers is growing by less than 1,000 jobs per year.