One remarkable facet of Occupy Wall Street is how focused the protesters are on student loan debt. A few thoughts about this:
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Many college grads have good reason to be upset. Educational inflation has been running far ahead of general inflation, without improvements in quality. Most higher education is still a good value (at least at the undergraduate level) but it’s not as good a value as it used to be. And that’s really what complaints about student debt are—complaints about how much education costs the consumer.
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The persistence of this runaway inflation is mysterious to me. Consumers are not imposing discipline on the market in the way I would expect—they fail to shop around for the best education value, and sometimes they buy education products that are worth less than their cost. People keep paying small fortunes to attend Tier 3 law schools even though the job market for their graduates is terrible. I don’t know how to get them to stop, but it seems to me that downward pressure on education prices will ultimately have to be applied from the consumer side. I do my part by trying to dissuade my friends from going to graduate school.
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Megan McArdle makes a strong case that allowing student loan debt to be discharged in bankruptcy would both provide needed relief to people who can’t service their debts and discourage inefficient consumption of education in the future.
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Some of the rumblings from the OWS folks are toward the idea that there should be broader relief of student loan debt. This makes little sense. Unlike with the housing market, there was no general lurch in asset prices that went unmatched by a reworking of liabilities. The better avenue for relief is one targeted to people who can’t service their debts—i.e., bankruptcy.
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While there are major problems to do with education prices and related debt, these problems have almost nothing to do with Wall Street and little to do with the for-profit sector. Most student loan debt is provided (directly or indirectly) by the government, and education is mostly provided by government and non-profit entities.
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College graduates’ problems should be kept in perspective. The unemployment rate for people with bachelor’s degrees or higher is 4.3 percent. The really big consumer debt problem in America is with mortgage debt. As such, the degree of focus within OWS on a problem that is specific to the relatively well-educated is a misfire.
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Not everybody who is complaining was wronged. The We Are the 99 Percent Tumblr includes complaints like this: “My father (multiple PhD’s) lives in his car so that he can do what he loves for a living rather than be a slave to the system.” A Columbia graduate student complained to the Associated Press that she has to eat rice and beans. These are not people who got screwed. These are people who have gainful employment available to them and made follow-your-dreams life choices that reduce their incomes. That’s their prerogative; it’s not anybody else’s problem.
Want to end OWS protests? Make all student loan debt IBR eligible and dischargable in bankruptcy after 5 years. Heck, reps from Sallie Mae proposed this a few years back.
It really is that simple.
Short of reinstatement of bankruptcy protections, this problem is going to get worse.
Why should homeowners who made a mistake have their mortgage debt absolved in bankruptcy, but student loan debtors who made a similar mistake be punished forever?
Reply to this commentLinkReport AbuseLet's make it 15 yrs so they have time to build on the "education"
Oh, and if you discharge your debt in bankruptcy, they foreclose on your diploma and degree is recalled.
We can't take back the "education" but we can take back the credential that should become collateral for the loan.
Reply to this commentLinkReport AbuseAndrew, your comment makes the most sense. Straight to the point and is fair and reasonable. Its not like bankruptcy is forgiveness, which some people don't realize. Your credit is ruined for 10 years, and what bank will grant you a mortgage if that is a mark on your credit? You think life after bankruptcy is easy? Nope. I also think that 5-7 years of responsible repayment is also viable prerequisite.
Reply to this commentLinkReport AbusePretty good plan...Go party for six years secure in the knowledge you'll never have to repay it, declare bankruptcy at the end of the deferment period--and voila! You're debt free.
Yeah, that's great for society, in the same way that encouraging people to walk away from mortgage debt and marriages consequence-free have been great for society.
Reply to this commentLinkReport AbuseI don't know enough about how student loans work to deal with your statement fully, but I'll suggest a reason why this concern may not be warranted:
If I know that a borrower cannot discharge his debt to me in bankruptcy, I have an incentive to grant the loan and to loan him the money on terms that are less-favorable to me (increasing the likelihood that he'll borrow the money) - and that's because I have some confidence, based on his inability to discharge the loan, that I'll get the money back eventually.
If the debt is dischargeable, I'm going to be much more careful. I'll be less likely to grant the loan and will want to do it on terms that are more favorable to me (thereby also discouraging him from borrowing the money).
The same analysis applies to such matters as whether the loan is guaranteed (by the government or by the student's parents), etc.
Or - as we saw in the run-up to the collapse of the housing market - by the lender's confidence in the stability in the value of the collateral for the loan.
In short, the more confident the lender feels about whether he'll get his money, the less concerned he is about the creditworthiness of the borrower. One rational consequence of allowing the discharge of student loans in bankruptcy is that you'll have fewer student loans.
Reply to this commentLinkReport AbuseThat is the way I read it too. A nice way to a free education or party.
Reply to this commentLinkReport AbuseYou attend a college fror two reasons:
1. study a topic of interest to become more knowlegable, or
2. study a topic that will become a means of economic enrichment (job).
A pursuit of a degree is art history is understandable, and desireable to some. But it is not a means of employment.
Reply to this commentLinkReport AbuseThe reason for the runaway inflation is very clear, once one admits the very simple mechanism that ALL colleges can increase tuition faster than inflation without any corresponding decrease in enrollment.
It's mildly puzzling why enrollment stays high, but not that puzzling. If one cannot afford college, there is always some loan or financial aid that comes through, usually government financed or guaranteed. So, it's not quite free, but it's so very heavily subsidized, with each subsequent policy advocating ever more subsidies, tuition goes up with government spending. Without the easy loans and financial aid, the market discipline would be much more present, and tuition would stop increasing so fast or even decrease.
Reply to this commentLinkReport AbuseI think one reason that college enrollment stays high is because it's 'expected'. High school seniors are not asked so much 'what do you plan to do with the future' as they are 'what college do you plan to go to'. We have to stop treating college as if it's somehow the only or even the 'best' option for graduating seniors. Not everyone is suited for college. And that's not just a statement on intelligence either. Some people with less smarts or learning have enough motivation to make up for their deficits. Some people with plenty of intelligence have no motivation and therefore, no business being in college.
Reply to this commentLinkReport AbuseThe problem is that there are far fewer jobs available for men with only a high school education. Right now, the demographic with the highest unemployment rate is men without a college education.
Manufacturing used to be one of the biggest employers of such men. But automation and globalization have caused a massive decline in manufacturing employment.
The other big employer was construction. But the bursting of the real-estate bubble means that construction won't become a booming industry again for a long time to come.
Where are the jobs in the private sector to replace the manufacturing and construction jobs?
Reply to this commentLinkReport AbuseThe lack of reduction in enrollment is very clear. It is because of the scam of a college degree being necessary for a successful career and the pushing of predatory student loans.
Cut out or cut back on the student loans and we'll see a decline in enrollment, shift to less amenity laden schools and only interest those student who want an education rather than a 4-yr singles party with a certificate of attendance at the end.
Reply to this commentLinkReport AbuseWhen the government took over student loans the interest rate went from the market rate to 7.5% - the government is fleecing students. As a resident I am paid barely above minimum wage expected (required) to work up to 320 hours a month (no unions or overtime for residents) and will have to be an economic slave to the debt (cannot leave medicine because I could not get a job that would pay enough for the 2-3K dollar monthly payment to service that student loan). I went in to medicine to help people now I have ridiculous debt and a work environment that is awful. As an emergency medicine physician I can expect to get paid for 8 out of 10 patients I see and that probably will get worse in the near future. I wonder if I could walk in to a coffee shop and pay for 8 out 10 coffees I order?
Reply to this commentLinkReport AbuseThere are so few reasons to go in to medicine, high student loan debt, terrible working conditions, long hours and patients that make outrageous demands and soon the government will pay me less when I do not receive an A+ from my patients. If you are considering medicine think about all of the aspects of that decision. Once you finish medical school and residency you will have few economic choices and 12 years of your life will have slipped through your fingers. Helping other people just cannot be a good enough reason to endure the hardships and for fewer economic rewards.
I know someone out there is going to say "hey doctors make good money what are they complaining about"? Doctors incur 11 to 15 years of debt with compounding interest and not only have to pay back that avalanche of student loans but that doctor does not contribute to their retirement for all of those years and starts deeply in the red as a newly minted physician. With the upheaval in reimbursement and the Medicare budget balanced on the backs of doctors (we will get a 30% pay-cut soon but no reduction in practice expenses, student loan debt or malpractice insurance) there are fewer reasons to go in medicine.
The educational circus is about to foist another assault on doctors. Through degree inflation nurse practitioners will soon be expected to add DNP to their name and join the ranks of other doctors in the health care field, The only problem is that their degree is half of what a physician is required to do and can be obtained almost exclusively online in some instances. They are lobbying congress for 100% of Medicare reimbursement (they currently receive 80% of Medicare reimbursement) and are demanding and getting laws changed so they can practice independently (without physician supervision) and do so in many States currently. So lets see half the years of school, online "internet degree", 100% reimbursement - why would anybody go to medical school?
As an emergency physician I am forced to provide free care by federal law, patients are coming to the ER for non-emergent medical complaints because they cannot get an appointment OR the insurance company will not approve a procedure that I will do to "work up" the patient or risk a lawsuit. This has led to overcrowding, patients complaining about wait times while some are there for the non-urgent problem they have had for 6 months and I may not even get paid....so as I conclude me tangential rant just think carefully about why you want to go into medicine it is not for the money, work hours (weekends and holidays for you medicine is 24/7), or life style the all suck!
Completely understand. Sadly today's professionals don't understand because their debt was so much less (now 50-60,0000 per year in tuition) and don't realize that the debt is nondischargeable. Oh, and when you do start earning enough to pay it off (whatever you do at least pay the interest before it capitalizes or you will really be in a world of hurt), you can't deduct the interest any longer.
Reply to this commentLinkReport AbuseThe problem lies in the belief that everyone can earn a living doing ONLY what the love to do. The reality is we've educated too many people with too much education and not enough brains to realize that getting a degree in humanities will not be enough to feed a dog let alone pay back their college loans.
These moonbats on Wall Street are frustrated that they can't spend the rest of their lives opining about esoteric non-sense and make large sums of money so they can all play on iPads in the park. Sorry but in order to survive today is no different then it was 50, 100 or even 200 years ago... you need to work HARD and not play all day explaining social issues. These fools have spent huge sums of money on degrees that will never feed them, but they want others to.
Sorry go out and get skills that can earn your way and stop asking society to let you have your way!
Reply to this commentLinkReport AbuseThe problem lies in the belief that everyone can earn a living doing ONLY what the love to do. The reality is we've educated too many people with too much education and not enough brains to realize that getting a degree in humanities will not be enough to feed a dog let alone pay back their college loans.
These moonbats on Wall Street are frustrated that they can't spend the rest of their lives opining about esoteric non-sense and make large sums of money so they can all play on iPads in the park. Sorry but in order to survive today is no different then it was 50, 100 or even 200 years ago... you need to work HARD and not play all day explaining social issues. These fools have spent huge sums of money on degrees that will never feed them, but they want others to.
Sorry go out and get skills that can earn your way and stop asking society to let you have your way!
Reply to this commentLinkReport AbuseNANCY PELOSI: Think of an economy where people could be an artist or a photographer or a writer without worrying about keeping their day job in order to have health insurance or that people could start a business and be entrepreneurial and take risk, but not job loss because of a child with asthma or someone in the family is bipolar—you name it, any condition—is job locking.
Reply to this commentLinkReport AbuseThe heavy increase in college costs over the past 30 years, as noted by NR's Victor Davis Hanson, is that universities and colleges are slaves to multiculturalism and political correctness. While faculty levels have decreased and salaries have stagnated, the number of administrative offices on campuses has grown staggeringly fast. My university has an office of community engagement, office of diversity, office of accessibility services (which forces us to further dumb down our courses to those with registered disabilities), office of assessment, office of academic enrichment (which is an office dedicated to the enormous amount of remedial work that an increasing number of students need because high schools have not prepared them for college), office of meetings and conferences, and so on.
Actual teaching and learning in the classroom takes up much less of what the student experience is than even when I was an undergraduate some 25 years ago.
So, when discussion of educational inflation is the topic, this must be brought into the equation.
Conservatives also must not fall into the trap of believing that all programs of study should equate to careers, along the lines of "Why study art history when there are no careers in it?" The historical essence of the university is the liberal arts and sciences. From Burke to Buckley there has been a conservative belief in education for lifelong learning, not simply for a job. The recent book Academically Adrift cited serious deficiencies in business schools and education schools in preparing students, compared to the humanities. And a growing number of business leaders are waking up to the fact that a history major might make a better executive than a management major because the former can think critically while the latter knows how to use spreadsheets. (e.g., External Link
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Convincing the morons currently protesting on Wall Street who majored in art history or French to go "work for the man" however is another story. They would see that as selling out.
Reply to this commentLinkReport AbuseHow can downward pressure be applied from the consumer side when population growth toward half a billion by mid-century is fueled by immigration? A cost-free help to many of our problems is to lower or end immigration.
Reply to this commentLinkReport AbuseLet 'em discharge student debt in bankruptcy? What a sweet deal for colleges. They'll tell prospective students "Yes, you'll graduate owing $140,00, and your degree in Bitter Women Studies is worthless, but just file bankruptcy and you'll be debt-free after four years of partying!
Make the colleges pay 25% of that forgiven debt. Reduce the moral hazard of penalty-free student loans.
Reply to this commentLinkReport AbuseI know many blame Wall Street for our current mess, though most of us enjoyed the ride on the upside.
Colleges and universities loved the real estate bubble as families felt richer with rising home equity values, thus more willing to pay for higher and higher tuition (and fees).
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