I Came of Age During the 2008 Financial Crisis. I’m Still Angry About It.

[KJP]

Some of you are way too harsh. Plenty of highly educated 50 year olds don't understand loans and debt—let alone a 17 year old who has been told since day 1 to go to the best school they can get into. To someone who has never really worked before, and has been financially supported their entire life, the difference between a $10k and $100k future payment is just some abstract # with no real weight behind it.

 

For example, I would consider myself pretty financially savvy. I've (responsibly) had a credit card since I was 15, bought my first stock at 13, have had a 401k and Roth IRA since I was 17, etc. But I also took out ~$100k of student loans to go to school, because I simply had no idea how much money that was. Sure didn't seem like a lot when every school tells you that 80%+ of their graduates make $100k. In retrospect, yes, I overpaid for my education. But I also don't see how 17 year old me could have known otherwise.

There's a broader underlying point here about the financial illiteracy of even apparently intelligent people in this country, whether teenagers or adults.  As you note, this person made the initial decision to go to NYU and major in journalism when he was 17 or 18 years old.  He appears to be an intelligent person.  So, why did he (and many others like him) not make wiser decisions? I understand the point about personal responsibility, but most people absorb the lessons they see around them.

Interesting question.

Looked for answers.

https://www.brookings.edu/wp-content/uploads/2016/06/Are-College-Students-Borrowing-Blindly_Dec-2014.pdf

https://static.newamerica.org/attachments/2358-why-student-loans-are-different/StudentLoansAreDifferent_March11_Updated.e7bf17f703ad4da299fad650f47ac343.pdf

 

So, this is an issue tied to individual responsibility.

But what if everybody around you (parents, friends, social circle, school, government and other institutions) say:

"Don't worry, just sign here."

Is it reasonable to expect that the average college applicant will behave responsibly?

Somehow, I would say that the "system" can be improved and not only through emphasis (and consequences) on personal responsibility.

 

This has a lot of parallels to the unfortunate mortgage episode that happened recently.

 

Doesn't history repeat itself sometimes?

Can we learn from mistakes?

 

I read the papers you linked to.  Although the New America paper is based on only 59 focus group participants, I think it's more interesting and suggests many causes, including immaturity, financial illiteracy and low agency.  For example, look at all the quotes suggesting that borrowers had no idea what their monthly payments would be or didn't know that they'd have to payback the loans if they didn't get a degree.  Similarly, the apparent total befuddlement about IBR, even after it was explained, is both sad and frightening.

 

I have no evidence to support it, but I continue to believe that we could address some of the problem by having mandatory basic financial literacy education in high school.  For example, with an internet connection, a graduating high school student about to take out significant loans to attend college should be able to figure out (i) the expected monthly payments on student loans at graduation; (ii) expected rent in the city they want to live in; (iii) a rough estimate of additional living expenses (car, food, etc.) and taxes; and (iv) whether all of those expenses are greater than or less than a reasonable estimate of the starting salary in their hoped for profession.  I don't actually expect most 17 and 18 year olds to do that on their own.  But if they were forced to do it as part of a graded financial literacy class, it would hopefully open their eyes up to what they're getting themselves into.  Along the way, they'd learn many useful pieces of financial knowledge, e.g., the effects of compound interest, amortization tables, the actual impact of payroll and income taxes, the actual cost of renting an apartment, etc.

 

[Cigarbutt]

ponsibility, but most people absorb the lessons they I read the papers you linked to.  Although the New America paper is based on only 59 focus group participants, I think it's more interesting and suggests many causes, including immaturity, financial illiteracy and low agency.  For example, look at all the quotes suggesting that borrowers had no idea what their monthly payments would be or didn't know that they'd have to payback the loans if they didn't get a degree.  Similarly, the apparent total befuddlement about IBR, even after it was explained, is both sad and frightening.

 

I have no evidence to support it, but I continue to believe that we could address some of the problem by having mandatory basic financial literacy education in high school.  For example, with an internet connection, a graduating high school student about to take out significant loans to attend college should be able to figure out (i) the expected monthly payments on student loans at graduation; (ii) expected rent in the city they want to live in; (iii) a rough estimate of additional living expenses (car, food, etc.) and taxes; and (iv) whether all of those expenses are greater than or less than a reasonable estimate of the starting salary in their hoped for profession.  I don't actually expect most 17 and 18 year olds to do that on their own.  But if they were forced to do it as part of a graded financial literacy class, it would hopefully open their eyes up to what they're getting themselves into.  Along the way, they'd learn many useful pieces of financial knowledge, e.g., the effects of compound interest, amortization tables, the actual impact of payroll and income taxes, the actual cost of renting an apartment, etc.

 

Not sure if formal teaching with an elaborate curriculum is the way to go or if only some kind of online simplified program could do the trick. Perhaps an even more targeted approach (cost effective) may help.

 

Just for awareness of potential evidence, there seem to be green shoots.

https://www.inceptia.org/PDF/Inceptia_LoanSummary_Whitepaper.pdf

https://www.in.gov/che/files/150722_PressRelease_TruthInBorrowing.pdf

https://www.in.gov/che/files/Loan_Disclosure_Template_for_Mail_Merge.pdf

 

A simple annual "reminder" seems to "nudge" people in the right direction.

A bit sad that we may need "programs" to help people helping themselves but the principle of secondary prevention is to minimize the impact of a disease once you have it. Obviously primary prevention is better but democracies are not perfect.

[james22]

To go into journalism and keep the major when newspapers were being gutted by the internet is not a wise decision, especially when English majors were in oversupply and prospects likely poor even in a good economy. 

 

Here are the bad decisions he made:

 

1.  Journalism - bad earning power and employment prospects.

2.  NYU -  ripoff, private school in ripoff city.

3.  Took on a ton of debt  (which he PROMISED TO PAY BACK, some with high interest rates loans).  It's like he LBO's himself.

4.  After graduation staying in a NYC in a likely low paying job.  Low pay, high costs and high taxes.

 

I'm guessing he didn't make a *financial* decision.

 

If you want to change the world, journalism, NYU, and NYC are what you do to make more likely your voice is heard. Debt doesn't weigh much against that.

 

... it is no longer worth being a journalist? Worth, of course, is a loaded word. It can refer to money, viewing journalism as a lucrative way to make a living. Or it can have a vocational meaning, implying that journalism is intrinsically a public service.

 

https://www.theguardian.com/media/2015/feb/15/would-be-journalists-change-world-alex-thomson-felix-salmon

[Cigarbutt]

To go into journalism and keep the major when newspapers were being gutted by the internet is not a wise decision, especially when English majors were in oversupply and prospects likely poor even in a good economy. 

...

 

I'm guessing he didn't make a *financial* decision.

 

If you want to change the world, journalism, NYU, and NYC are what you do to make more likely your voice is heard. Debt doesn't weigh much against that.

 

... it is no longer worth being a journalist? Worth, of course, is a loaded word. It can refer to money, viewing journalism as a lucrative way to make a living. Or it can have a vocational meaning, implying that journalism is intrinsically a public service.

 

https://www.theguardian.com/media/2015/feb/15/would-be-journalists-change-world-alex-thomson-felix-salmon

 

Trust in media is reaching cyclical lows as the media used by media is undergoing transformation.

But "there are so many good stories that haven't been written yet".

If one of my children would decide to become a journalist, I would say that the long term value has not changed.

[wachtwoord]

To go into journalism and keep the major when newspapers were being gutted by the internet is not a wise decision, especially when English majors were in oversupply and prospects likely poor even in a good economy. 

 

Here are the bad decisions he made:

 

1.  Journalism - bad earning power and employment prospects.

2.  NYU -  ripoff, private school in ripoff city.

3.  Took on a ton of debt  (which he PROMISED TO PAY BACK, some with high interest rates loans).  It's like he LBO's himself.

4.  After graduation staying in a NYC in a likely low paying job.  Low pay, high costs and high taxes.

 

I'm guessing he didn't make a *financial* decision.

 

If you want to change the world, journalism, NYU, and NYC are what you do to make more likely your voice is heard. Debt doesn't weigh much against that.

 

... it is no longer worth being a journalist? Worth, of course, is a loaded word. It can refer to money, viewing journalism as a lucrative way to make a living. Or it can have a vocational meaning, implying that journalism is intrinsically a public service.

 

https://www.theguardian.com/media/2015/feb/15/would-be-journalists-change-world-alex-thomson-felix-salmon

 

Change the world? LOL!

 

Being part of the mainstream media (and the vast majority of the journalists are) means being part of the governments propaganda machine (and thus doing evil, not good). Read what they write and know it's true. No mainstream media is reporting on the latest shananigans with Assange and any real independant media outlet would as it's their neck on the line next (yes Assange is a journalist).

 

There is just hardly any free media left as the last decades have shown a huge crackdown on free speech (both in Europe and the US, the rest of the world never really had it as far as I can tell). The only exceptions are wikileaks and alt right media and those aren't jobs anyone chooses that wants to make a decent living.

 

On topic: he made his bed now he must lay in it. As soon as he stops externalizing blame he might turn into anything else than a screw-up. I doubt he ever will.

[LongHaul]

ponsibility, but most people absorb the lessons they I read the papers you linked to.  Although the New America paper is based on only 59 focus group participants, I think it's more interesting and suggests many causes, including immaturity, financial illiteracy and low agency.  For example, look at all the quotes suggesting that borrowers had no idea what their monthly payments would be or didn't know that they'd have to payback the loans if they didn't get a degree.  Similarly, the apparent total befuddlement about IBR, even after it was explained, is both sad and frightening.

 

I have no evidence to support it, but I continue to believe that we could address some of the problem by having mandatory basic financial literacy education in high school.  For example, with an internet connection, a graduating high school student about to take out significant loans to attend college should be able to figure out (i) the expected monthly payments on student loans at graduation; (ii) expected rent in the city they want to live in; (iii) a rough estimate of additional living expenses (car, food, etc.) and taxes; and (iv) whether all of those expenses are greater than or less than a reasonable estimate of the starting salary in their hoped for profession.  I don't actually expect most 17 and 18 year olds to do that on their own.  But if they were forced to do it as part of a graded financial literacy class, it would hopefully open their eyes up to what they're getting themselves into.  Along the way, they'd learn many useful pieces of financial knowledge, e.g., the effects of compound interest, amortization tables, the actual impact of payroll and income taxes, the actual cost of renting an apartment, etc.

 

Not sure if formal teaching with an elaborate curriculum is the way to go or if only some kind of online simplified program could do the trick. Perhaps an even more targeted approach (cost effective) may help.

 

Just for awareness of potential evidence, there seem to be green shoots.

https://www.inceptia.org/PDF/Inceptia_LoanSummary_Whitepaper.pdf

https://www.in.gov/che/files/150722_PressRelease_TruthInBorrowing.pdf

https://www.in.gov/che/files/Loan_Disclosure_Template_for_Mail_Merge.pdf

 

A simple annual "reminder" seems to "nudge" people in the right direction.

A bit sad that we may need "programs" to help people helping themselves but the principle of secondary prevention is to minimize the impact of a disease once you have it. Obviously primary prevention is better but democracies are not perfect.

 

I think a class and other nudges and good ideas probably would help a bit on the margin.  BUT as I have gotten older and have seen how people make their financial decision there is a ton of stupidity, emotion and laziness involved and I think 95% of it doesn't have to do with knowledge but really emotional discipline to defer gratification.

 

The internet has often 50x the amount of information you need all you have to do it look it up to make prudent decisions but people still don't use to to learn and save.  Such is life... I'll bet it will never change and I just expect it.  Sorry to sound defeatist but I think it is largely realistic.

[Gregmal]

My thoughts have always been that coming of age during the financial crisis would be a blessing. You basically get into things on a generational reset. Housing prices are cheap, employment would start out challenging but be in expansion for for the next 10-20 years, and more importantly, you'd have fresh in your mind the lessons learned by others during the GFC. I never thought it would be an excuse.

[John Hjorth]

... As soon as he stops externalizing blame he might turn into anything else than a screw-up. I doubt he ever will.

 

That's actually also the really hard part. To recognize and derive, by analysis of your own actions in the clear rear mirror, that you were not wise, nor smart, perhaps even silly, or just a plain idiot. Over that hurdle, it usually gets easier along the way, depending of to which degree one has screwed up.

 

I've been there about ten years ago [and have posted about it here on CoBF], done that & got that [selfimposed] "Idiot!"-shirt.

 

- - - o 0 o - - -

 

The moral hazard dimension of the GFC has been discussed at great length in a series videos produced by CNBC recently - interviews with some of the key players about the wild days  - about 15 minutes each - among them Mr. Buffett.

[wachtwoord]

Is it that hard really? I basically have always done this, even as a child. How can you expect to do better for yourself if you don't analyze what you (you, not someone else) do wrong in order to avoid it in the future? Why do you think you deserve anything whatsoever?

 

I think people (and millenials particular, which apparently I officially just fall into as well) are just too damn soft on themselves. I've always been far more strict on myself than anyone else and alled myself an idiot on many occasions.

 

I don't think that's hard. That's not being a pussy.

 

Btw:

As far as it wasn't clear, this wasn't meant at you John. You're clearly open to questioning your own failing and looking to learn from them :)

[Cigarbutt]

I think a class and other nudges and good ideas probably would help a bit on the margin.  BUT as I have gotten older and have seen how people make their financial decision there is a ton of stupidity, emotion and laziness involved and I think 95% of it doesn't have to do with knowledge but really emotional discipline to defer gratification.

 

The internet has often 50x the amount of information you need all you have to do it look it up to make prudent decisions but people still don't use to to learn and save.  Such is life... I'll bet it will never change and I just expect it.  Sorry to sound defeatist but I think it is largely realistic.

 

Fair enough. Helpful to remember however that, if people were rational at all times, value investing would be much less fun. :)

Still painful to watch an upcoming train wreck, even with apparent slow motion.

 

Is it that hard really? I basically have always done this, even as a child. How can you expect to do better for yourself if you don't analyze what you (you, not someone else) do wrong in order to avoid it in the future? Why do you think you deserve anything whatsoever?

 

I think people (and millenials particular, which apparently I officially just fall into as well) are just too damn soft on themselves. I've always been far more strict on myself than anyone else and alled myself an idiot on many occasions.

 

I don't think that's hard. That's not being a pussy.

 

Good for you.

Anecdotally (but maybe typical of what is happening in the education systems of developed countries?), earlier this week, I went for the meeting with the teacher to start the school year (6th grade). The teacher seemed to be dedicated and competent but spent about half of her presentation on the importance of student self-esteem and how the inner voice is an enemy.

I agree with you that one should make his or her inner voice an ally but, in my humble experience, the strength and purpose of the inner voice tends to be inversely proportional to the inner score card strength.

 

The combination that both John and you show appears to be rare.

[flesh]

1. Let the private market in. Someone with the right tools needs to measure. If it was

ubiquitous that all earnings from nearly all colleges were tracked by major in real time complete with analyses/predictions things would change. Skin in the game. Nobody would have to let other's pay for their school it would be optional. You could have caps, 10% of earnings over 20 years max, whatever. This would minimize debt, maximize real ROI's and solve most of the problems. Let the market get the real data. Let it price what x degree will be worth in the future. Let everyone have access to the pricing for free. Let it be known. This would reduce college cost as well. There would be fewer people engaging in the majors that aren't needed/don't pay and more where we need them. If I'm thinking about journalism as a major and it's 100k and I notice if I go into stem, it's free and they get 10% of my pay for 20 years, some of us will go into stem. Those of use who are very poor who are capable are even more likely to go into stem or whatever is going to be needed next 20 years.

 

2. Free college privately paid for, likely non accredited initially but worth something, like a ged to a high school diploma. A mainly online university free to everyone in the usa wouldn't cost much, 10's of M's/year perhaps. Some involved would work for free, some would take less pay, anyone with internet could complete a degree. If it wasn't accredited initially, it would have some market value signaling whatever the average of the graduates value vs say a state school or community college. It would prove 100's of hours worked at a college level difficulty, this would be enough for many. I believe there would be enough private funding. Over time as it's value was quantified, more would come, less would pay high prices for regular college and college prices would come down as they were forced to be more efficient. Obviously this would work in some subjects and not others. More undergrad. I believe we'd see many educating themselves later in life whether needed or not, everyone would be smarter.

 

3. At least, put a cap on the period before a bk can wipe away the loans. 15 years, whatever. Once this is priced in down goes college prices.

 

 

 

 

[wachtwoord]

 

I agree with you that one should make his or her inner voice an ally but, in my humble experience, the strength and purpose of the inner voice tends to be inversely proportional to the inner score card strength.

 

The combination that both John and you show appears to be rare.

 

Am I understanding correctly that you believe in general more intelligent people are weaker and less intelligent people are stronger?

 

If so, I think it has more to do with lack of adversity and competition in the western world. It indeed starts with the education system which is weak as hell (grading "on a scale" is terrible). In non-western countries it's normal to show who is best of the class, second best etc. In Europe they try to hide it ...

 

I guess I'm "lucky" in the sense that I didn't need to grow up in adverse situations (safe middle class stable family) while most people do need this?

[RichardGibbons]

If so, I think it has more to do with lack of adversity and competition in the western world. It indeed starts with the education system which is weak as hell (grading "on a scale" is terrible). In non-western countries it's normal to show who is best of the class, second best etc. In Europe they try to hide it ...

 

I guess I'm "lucky" in the sense that I didn't need to grow up in adverse situations (safe middle class stable family) while most people do need this?

 

Well, or it could be that your hypothesis is bogus and related to your biases rather than evidence.

 

Like, you're implying that the people who grow in tough, non-western countries are likely to be more successful because of those challenges. Yet, western countries composed of people with this soft western upbringing have brought about a situation where the west is the dominant economic force (and probably cultural force) on earth. So, to me, it seems hasty to imply that the western way is horrible, and the methods of less successful countries are preferable.

[John Hjorth]

Many [many! [ : - ) ]] years ago, I had a GF ... - I was so crazy about her, and so in love with her! - who once said to me: "I guess, I just started getting put on the pot tilted ...", when I had serious discussions with her about her doings, that I from time to time simply coulden't accept.

 

It all boils down to, that you have to take on responsibily for your own life - in all aspects, combined with the understanding & application of some quite simple, but very important basic rules of how to live your life, if you want to live without financial concerns.

 

I think all the posts from Cigarbutt in this topic so far, and the deep line of thinking behind those posts, is exactly a mirror of that particular line of thinking.

[wachtwoord]

If so, I think it has more to do with lack of adversity and competition in the western world. It indeed starts with the education system which is weak as hell (grading "on a scale" is terrible). In non-western countries it's normal to show who is best of the class, second best etc. In Europe they try to hide it ...

 

I guess I'm "lucky" in the sense that I didn't need to grow up in adverse situations (safe middle class stable family) while most people do need this?

 

Well, or it could be that your hypothesis is bogus and related to your biases rather than evidence.

 

Like, you're implying that the people who grow in tough, non-western countries are likely to be more successful because of those challenges. Yet, western countries composed of people with this soft western upbringing have brought about a situation where the west is the dominant economic force (and probably cultural force) on earth. So, to me, it seems hasty to imply that the western way is horrible, and the methods of less successful countries are preferable.

 

Why do you think the problem lies mainly with the latest generations? (1950s onwards, the later the worse it got). It seems like societal hubris. Like a late stage Roman empire.

 

Even though I came in contact with many more non-western people than the average person that lives in the west, of course my sample size can never be large enough to draw any sort of significant conclusion and everything is anecdotal in nature. I also didn't say they are more successful ;)

[Cigarbutt]

"I agree with you that one should make his or her inner voice an ally but, in my humble experience, the strength and purpose of the inner voice tends to be inversely proportional to the inner score card strength."

 

Am I understanding correctly that you believe in general more intelligent people are weaker and less intelligent people are stronger?

 

Sorry, it's difficult to convey some stuff on the internet.

 

Another way to say what I mean is that there are only a few people who can show both show a high level of confidence AND a high level of critical self-doubt. It's hard because one tries to achieve the balance between two contradictory forces.

 

When we take decisions, we have incomplete information and may have to act decisively (like the subject of this thread or when we make an investment) while at the same time remain comfortable that we may be wrong. I think Seth Klarman has said something like: "You have to balance arrogance and humility".

 

To understand this though perhaps makes it easier to recognize mistakes and to learn from them. An alternative is to remain angry.

[RichardGibbons]

Why do you think the problem lies mainly with the latest generations? (1950s onwards, the later the worse it got). It seems like societal hubris. Like a late stage Roman empire.

 

Yeah, I mostly agree with this, but I'm also concerned that people (i.e. me) generally look for disaster, so in my paranoid search for disaster I'm interpreting the evidence in a way to support a "late state empire" hypothesis.

 

Regardless, I think the problem is that so much has changed since the 1950s that one can reasonably attribute the downward spiral to many different causes, not just kids' soft upbringings. The cause one picks is probably based on one's own biases.

 

For instance, I'd attribute it to the evolution of "greed is good", morphing from the sensible "people acting in their own interests generally makes for efficient and effective markets" into "if I want it, it's good, so ethics and compassion are irrelevant as long as I get mine." I think the latter attitude leads to massive inequalities and corruption. That results in people like Chavez and Trump getting into power which leads to the system collapsing--a really bad outcome for both rich and poor.

 

I've heard from several people that one sign of the decline of an empire is the rise of celebrity chefs.  I don't know if there's actually evidence for that theory, but it does amuse me considering reality TV these days.

 

[wachtwoord]

"I agree with you that one should make his or her inner voice an ally but, in my humble experience, the strength and purpose of the inner voice tends to be inversely proportional to the inner score card strength."

 

Am I understanding correctly that you believe in general more intelligent people are weaker and less intelligent people are stronger?

 

Sorry, it's difficult to convey some stuff on the internet.

 

Another way to say what I mean is that there are only a few people who can show both show a high level of confidence AND a high level of critical self-doubt. It's hard because one tries to achieve the balance between two contradictory forces.

 

When we take decisions, we have incomplete information and may have to act decisively (like the subject of this thread or when we make an investment) while at the same time remain comfortable that we may be wrong. I think Seth Klarman has said something like: "You have to balance arrogance and humility".

 

To understand this though perhaps makes it easier to recognize mistakes and to learn from them. An alternative is to remain angry.

 

Thanks for clarifying. I fully agree.

[John Hjorth]

... Btw:

As far as it wasn't clear, this wasn't meant at you John. You're clearly open to questioning your own failing and looking to learn from them :)

 

Thank you, wachtword,

 

Today, I can take it.! [ : - ) ] And I appreciate your comment here - to me, it actually demonstrates, that you're openminded, too. I would argue, that I was mentally "hit double" by this ... - it was soo embarassing, and to some extent taboo, too - everybody who I was close to, could feel that there was something wrong, simply because I misthrived. Hit double in the sense by being a CPA, and then you don't even master & manage to be in full control of "your own personal "sh!te!"" [<- SharperDingaan terminology here!].

[LC]

On journalism - Sequoia fund routinely hired financial journalists as analysts. They eschewed typical investment analysts. Investigative journalism, the ability to distill facts and write a story - these are powerful skills.

 

[no_free_lunch]

I can sympathize with this, but I don't know the solution.  I know that wages in my field are up maybe 1/3 over the last 20 years while rent or housing prices are up double, probably more than double actually.  Tuition costs are up by about 50% over that period, here in Canada at least.  It's got to be tough getting started these days.  I think it's a combination of globalization and artificially low interest rates but really just a guess.  Not sure what to do about it, people freak out when globalization is resisted, interest rates shouldn't be this low but it will crash the global economy if you try to fix them.  I just know that going the socialist route (if that's what the article is implying) is going to make thing worse.

[rukawa]

Just get rid of student loans......education cost problem solved.

 

Get rid of mortgages...housing cost problem solved.

 

get rid of health insurance...health cost problem solved.

 

Almost all these "free market" problem are because people are paying for things with money that hasn't been earned the hard way and so they aren't very careful or thorough in determining whether they are getting value. You basically never see these problems in markets not financed primarily by either insurance or credit. A good start would be if government were to stop trying to interfering in all of this.

 

 

 

 

 

 

[wachtwoord]

Just get rid of student loans......education cost problem solved.

 

Get rid of mortgages...housing cost problem solved.

 

get rid of health insurance...health cost problem solved.

 

Almost all these "free market" problem are because people are paying for things with money that hasn't been earned the hard way and so they aren't very careful or thorough in determining whether they are getting value. You basically never see these problems in markets not financed primarily by either insurance or credit. A good start would be if government were to stop trying to interfering in all of this.

 

This. I love how socialists like to frame things to be free market failure when it clearly isn't (free market can't fail).

 

In Europe they love to privatize companies but then impose heavy regulation and arbitrarily subsidize parts and when it doesn't work blame the free market. No, the problem is you created something worse than a nationalized "company". Not much free about a regulated market is there?

 

I wonder how much of this is conscious manipulation and what portion is caused by utter retardation (e.g. not understanding a simple word such as "free")

[LC]

Just get rid of student loans......education cost problem solved.

 

Get rid of mortgages...housing cost problem solved.

 

get rid of health insurance...health cost problem solved.

 

Almost all these "free market" problem are because people are paying for things with money that hasn't been earned the hard way and so they aren't very careful or thorough in determining whether they are getting value. You basically never see these problems in markets not financed primarily by either insurance or credit. A good start would be if government were to stop trying to interfering in all of this.

 

This is a net-negative solution.

 

Take student loans. Yes you solve the problems of recent graduates with excessive debt relative to their earning potential.

 

You also fvck over a lot of society because you have people who are capable of performing high-skill labor who will never be able to, because they do not have 250K liquid cash to pay for university.

[bizaro86]

Just get rid of student loans......education cost problem solved.

 

Get rid of mortgages...housing cost problem solved.

 

get rid of health insurance...health cost problem solved.

 

Almost all these "free market" problem are because people are paying for things with money that hasn't been earned the hard way and so they aren't very careful or thorough in determining whether they are getting value. You basically never see these problems in markets not financed primarily by either insurance or credit. A good start would be if government were to stop trying to interfering in all of this.

 

This is a net-negative solution.

 

Take student loans. Yes you solve the problems of recent graduates with excessive debt relative to their earning potential.

 

You also fvck over a lot of society because you have people who are capable of performing high-skill labor who will never be able to, because they do not have 250K liquid cash to pay for university.

 

I suspect he means (and if so I agree) that the cost of tuition would come way down in the absence of government intervention in student loans.

 

Interestingly, in Canada you can get a six figure loan to go to med school from a private institution that isn't guaranteed by anyone other than the student. I couldn't believe it, but a med student applied to rent a condo I own. I asked him about source of funds, and he showed me his loan documentation, and did a three way call with the branch (which I dialed). Basically, they were willing to loan him the money because the credit risk is good that he'll be able to pay it back.

 

In a "no gov't backed student loans" scenario, the market would offer loans to some occupations, and the cost of education would likely decline as institutions are no longer able to fund professors who don't want to teach with student funds. I think it'd probably increase the efficiency of the economy, because you'd get more people taking actually useful degrees and people who end up in jobs that don't really need one wouldn't take one.