f

[SharperDingaan]

We see nothing wrong with this at all; folks just don't like the consequences of their decisions.

 

You do not have to go to university.. you could have gone to college & got a technical diploma/designation;

You do not have to go full-time ... you could have done a co-op, or gone part-time, while continuing to work;

You did not even have to physically attend ... on-line is commonplace, & at both undergrad & grad level;

The expectation is that you will work part-time in your field .. & actually apply what you know while going to school;

And on graduation, you move to where the work is ... wherever it is.

 

Status is not an excuse, there is nothing wrong with the trades or apprenticing in them; millions do.

Stupid is not an excuse, these students knew exactly what they were doing; & are hoping that squeeking will get them the grease.

Youth is not an excuse, most youth in the world gets on a plane & travels to the work; wherever in the world it is.

Debt is not an excuse, nothing stops you from doing a BK & starting again.

 

These over-privileged thought they were above everybody, chose vanity over reality, & relied on an implicit family bail-out if they got into trouble. And now that the bail-out is not forth-coming, the belles cannot handle the fall from grace. Gimme all your money or I'll put you in a home, is a well worn threat that has been practiced by many generations, & in many cultures. And usually uttered right up till mom/dad kick them out onto the street, change the locks, cut off the trust fund, & go on vacation for a few months

 

These students are not special, they are not owed a job, & there is nothing to prevent them from turning their lives around; millions around the world die every day simply because they cant access clean water.

 

SD

 

[Morgan]

My best friend is Korean and he said even the poor kids feel academic pressure from their parents.  You don't see that as much in the poor communities in the United States.

 

 

Yeah, does the following statement make any sense?

 

The University of California is crammed with Asian students because they are the richest demographic in American society

 

I think he's saying that Koreans of all income levels generally value education more than low income American families. Which over two or three generations would make the Koreans quite wealthy, just as you say.

 

 

I think the whole thing is dominated cultural influence (in other words, the parents).

Completely agree.

 

Don't know about the rest of your questions though.

 

Debt is not an excuse, nothing stops you from doing a BK & starting again.

If I understand correctly, student loans (at least my students loans) are not forgivable in bankruptcy. Everything else though is pretty true. Everyone has many choices, people just need to live with the consequences of thier actions.

[matjone]

Yeah I think the whole problem is that it's hard to get it off in a bankruptcy.  People do stupid things when they are young and pay for them later, but if you get in a hole that's too deep to dig out of, why not let them start over?

[DTEJD1997]

If she is just HS educated, maybe she makes 30k a year.  And if she becomes a nurse, let's say she will make 80k (I know it's less when you start but you can make more than 100k as a nurse I believe so I used a round figure somewhere in the middle).

 

So that's a 50k difference in pre-tax wages that she will gain.  I don't know the correct multiple to place on wages to get a value, but let's say it's 10.  So just HS educated she is worth 300k, as a nurse 800k.  The cost of education + foregone wages needs to be 500k to be breakeven.

 

Or we can put it another way: She will forgo 120k in earnings and have a 100k in debt for 220k in economic costs.  Therefore, assuming a ten multiple, she needs to increase her earnings by 22k to break even.

 

You can debate my assumptions.  But the point is that I think we can come up with a back of the envelope way of determining if that 100k debt is worth it.  I think to become a nurse, in most cases, it probably is.

 

Jay:

 

Figures in the assumptions is the key!

 

Here in my area of the country, very few people with high school diplomas are pulling down $30k a year.  There are certainly some, mainly men in the skilled trades or unions...plumbers, pipe fitters, HVAC, truck drivers, etc.  Stevedores, etc. 

 

Nurses DEFINITELY do not start anywhere close to $80k.  I used to date an emergency room nurse for over a year.  She worked VERY hard, and made decent money.  She had just about 10 years experience, and was making about $60k, depending on overtime & such.  I am in a fairly low cost of living environment.

 

Looking at some career websites, they are reporting nurses starting at about $36k (fresh out of school), to about $90k a year with 20 years experience and some specialties.

 

So I guess your assumption is a little high, but can come close after 20 years or so.

 

Any way you slice it, assuming she stays in state, this girl is going to have a VERY HARD time in life (from a financial perspective).  Spending $100k to get a nursing degree is a very foolish thing, yet a lot of people do it.  A lot of society thinks that all education is good, regardless of the cost.

 

Effective education at low or reasonable costs is worth it.

 

Ineffective, or highly priced education is a life ruining mistake.

 

 

[jay21]

I went to school and live in a major city on the East Coast so I probably skewed the data.  I believe starting salaries for nurses in major cities are >50K.

 

Just a quick google: http://money.usnews.com/careers/best-jobs/registered-nurse/salary

 

The 10% - 90% band is 44k to 96k with median being 65k.  So 80k is high, maybe I should have picked 65k or lower.  But I don't think that changes the conclusion.  I was more trying to illustrate a method than give a definitive answer.  I would think the delta between a HS degree and becoming a registered nurse is high enough in most areas to warrant a sizeable investment.

 

Also found this: http://www.drexel.com/online-degrees/nursing-degrees/nursing-salary-guide/index.aspx

[SharperDingaan]

Sound familiar ...

http://www.cbc.ca/news/world/affluenza-defense-earns-ethan-couch-probation-in-fatal-dui-1.2462273

 

[Gamecock-YT]

Yeah I think the whole problem is that it's hard to get it off in a bankruptcy.  People do stupid things when they are young and pay for them later, but if you get in a hole that's too deep to dig out of, why not let them start over?

 

moral hazard. Plus, what are the lenders going to take back from you? A piece of sheepskin? A big lesson my parents tried to instill in me is that there are consequences for your actions.

[matjone]

Bankruptcy is still a pretty harsh consequence IMO.  I think we should let those that are in too deep to get out start over with a clean slate.

 

As far as the lenders not having collateral - they  loaned an amount that was out of line with their prospective income.  They aren't going to be able to pay it back.

[SharperDingaan]

No .... BK is entirely appropriate.

 

If I make an investment, & lose, I do not get bailed out for being stupid. Education is an investment.

 

If the market were corrupted; trades would either be cancelled (ie: flash crash), or recompensed via class action (ie: LIBOR, product miss-selling). Where the required correction is large enough to be an immediate & sustained threat to all society; government intervenes to mitigate the impact (ie: housing crisis). Not every student over-borrowed, & those that did over-borrow are a threat only to themselves - not society in general. No bail-out.

 

Government loans, & outstanding taxes, don't discharge for very good reason; and those loans are offered by society because it is highly advantageous overall to have an educated workforce, & re-payment is guaranteed. Some abuse is expected, but it is not permitted to stop loans to those who would not otherwise be able to go to school. School or no-school is the students decision - because they have to pay the loan back.

 

Most students are borrowing on the implied intent of never paying the loan back, the same way you never intend to repay your mortgage. Debt service in both cases is paid from ongoing income - except the mortgage gets paid back when you sell the house. If in your lifetime you have pay off your school, put your kids through school, & then save for retirement; just how exactly were you planning to pay off school- ie: you were either relying on an inheritance, or never really intending to repay the school loan.

 

Millions of people successfully pay off their loans everyday. You do not get a break because you were stupid, or repaying will be life altering. We make it life altering - if you do not repay; the mob would break your legs & make you a cripple for life.

 

You get to keep your mobility, & those loans stay until they are repaid.

 

Life is a bitch  :(

 

SD

 

 

 

 

 

[CorpRaider]

If borrowers could have the debt extinguished via bankruptcy a lot of these shitty Caribbean medical schools and some of the for profit diploma mills wouldn't be in business defrauding kids.  Just saying, maybe the normal rules governing obligor and obligee have some merit.  Also re: income inequality, we have got to modify the social support system so that the bottom of society is not financially incented to procreate beyond two kids we don't need to be created incentives to explode the population at the bottom economic rung.  Maybe there was some merit to this back when labor was remotely scarce, but that was before the advent of computing and robotics.

[LC]

If borrowers could have the debt extinguished via bankruptcy a lot of these shitty Caribbean medical schools and some of the for profit diploma mills wouldn't be in business defrauding kids.

 

I don't disagree, but nobody held a gun to anyone's head and made them take out a loan. Blaming the school/government/society isn't going to change that fact.

[ERICOPOLY]

That sounds like the root cause of the student debt problem.  Lenders would be more careful who they lend to if there were threat of bankruptcy.

 

The A+ student with an acceptance letter to the UC Berkley Engineering school would still be able to get a loan.

 

The lender can be incentivized to guide the child with no worldly experience away from costly mistakes.

[LC]

I think the root cause is the tendency within humans to eat the candy now and not think about the stomach-ache later...which is also what keeps value investors in business.

 

Does a terrible government policy of "guaranteeing" the loans enabling predatory lenders add fuel to this fire of human nature? Of course...but to me, I don't believe this is a valid excuse for people complaining about their student loan debt.

 

Gosh, in a perfect world lenders absolutely should be incentivized to properly handle this situation. Most could go home at night and feel a lot better about themselves, too. It baffles my mind why the current situation remains from a legislative perspective. Well, aside from there not being enough blood in the stone to "incentivize" enough politicians to change it.

[ERICOPOLY]

A lot of 18 year olds are basically children still.

 

It's why we don't let them drink.

[ERICOPOLY]

Actually, I just realized something that is completely unfair here.

 

1.  Child takes out loan at age 18 for college

2.  Works out wonderfully and he make $300,000 a year in Silicon Valley soon after graduation

3.  Has to pay 50% income tax

4.  Has to pay off his student loan with after-tax income.

 

Huh?  Why is he left to pay off the student loan when he only gets to keep 50% of his income?

 

Why does the government feel entitled to half the income, but doesn't feel obligated to pay down half of the loan principle?

 

That's a free ride if there ever was one.

[LC]

In Canada the drinking age is lower! :)

 

I like that idea...if the govt really wants to help all these students out, your way sounds like it is one of the better ways to go about it.

[DTEJD1997]

I don't disagree, but nobody held a gun to anyone's head and made them take out a loan. Blaming the school/government/society isn't going to change that fact.

 

That is very true, but what about all the fraud?

 

Specifically, many of the "for profit" schools have been sued (some times successfully) for telling students that you will $70k a year with your culinary degree!  Or law schools saying they have a 98% employment rate with a $75k median salary?  To date, none of the law school lawsuits have been successful, but just give them time...

 

I personally had two employees who were told by recruiters that they would be making well over $20/hour if they got their "A+" computer certification from the school.  I told them not to believe that, but they did...only after getting the certificate did they come to realize that they would make LESS than they already were in the warehouse/shipping department!

 

I am sure I'm only scratching the surface here about schools inducing students to enter their programs.

 

There is NO underwriting discipline when it comes to student loans.  Why should the lender not take any risk?  Why should the educators get a free pass?  Shouldn't they have some stake in the outcome of their students? 

 

There is a law school in Michigan that has a bar passage rate of LESS THAN 50%!!!!  This has been going on for over a year now.  How do they have such high employment rates?  I fail to see how a graduate from a bottom tier school who has FAILED the bar exam is going to be employed in the legal field!

 

http://abovethelaw.com/2013/12/harder-michigan-bar-is-here-to-stay/

 

I STRONGLY support students being able to bankrupt out of their loans if they have made a good faith effort to repay them after 4-5-6 years.  Why is society loaning such huge sums of money to people who have LITTLE chance of ever paying it back in full?

 

Why does education cost as much as a house now?  It was not that expensive 20 years ago, even adjusted for inflation...

 

 

 

 

[ERICOPOLY]

Every time they raise the income tax rate, it effectively makes it harder to pay off the student loan.

 

So suppose they give you a tax credit for principle repayment on student loans?

 

[matjone]

I know people in their late 40's with SL debt they've been living with for close to 30 years, that they'll probably live with till they die.  To lock someone into that for a decision they made when they were 18 just doesn't make any sense to me.  Let these people declare bankruptcy and start over.

[ERICOPOLY]

It looks like you can only deduct up to $2,500 of student loan interest:

 

http://www.irs.gov/taxtopics/tc456.html

 

The interesting thing is that it's kind of like a business.  You borrow money to purchase your education, and your true "profit" is the spread between your income and the cost of buying that income (your education).

 

Therefore there should really be no limit to how much student loan interest you can deduct.  After all, you aren't really making any money for yourself on every dollar you pay in student loan interest. 

 

Your "net profit" is your income less your student loan interest.

 

It's a bit like if the government put a limit on how much bond interest expense a corporation could deduct.  What if SHLD wasn't allowed to deduct it's interest expense from it's revenues?  It would be taxed on revenue, not income.  That wouldn't be fair either.

 

[SharperDingaan]

Quick comment on young & stupid as an excuse ...

 

Used to be that at 18 you got drafted, & there was often a real possibility of either death or maiming within a year. In many places that continues to exist, & it applies to both sexes, equally. If you had not grown up before you were drafted; you were forced to during basic training, & then again when you met your first still warm dead body. Kiddies went in; grown men & women come out.

 

In most places, at 18 you are deemed mature enough to drink, smoke, do drugs, & drive. Be immature enough to do them together, & screw-up, & you will remove yourself from the gene pool. Hopefully, just yourself, & with no damage to passengers & bystanders.

 

Student loans are no different ... you just don't die if you screw up.

 

SD

 

 

 

 

 

 

 

 

 

[DTEJD1997]

Quick comment on young & stupid as an excuse ...

 

Used to be that at 18 you got drafted, & there was often a real possibility of either death or maiming within a year. In many places that continues to exist, & it applies to both sexes, equally. If you had not grown up before you were drafted; you were forced to during basic training, & then again when you met your first still warm dead body. Kiddies went in; grown men & women come out.

 

In most places, at 18 you are deemed mature enough to drink, smoke, do drugs, & drive. Be immature enough to do them together, & screw-up, & you will remove yourself from the gene pool. Hopefully, just yourself, & with no damage to passengers & bystanders.

 

Student loans are no different ... you just don't die if you screw up.

 

SD

 

Well yes, but you still have the problem of fraud going on with some of the schools.  They are enticing students to take out the debt with false/misleading statistics regarding employment possibilities and income levels.

 

How is it fair for somebody to be "tricked" into taking out loans thinking they will have a reasonable shot of paying them back?

 

Several of the "for profits" have been successfully sued for this very thing...many suits have failed...

 

Several (12? 14?) law schools have been sued also.  Most of the suits have been dismissed in the early stages, but not all of them.

 

Additionally, you have government intervention in the loan market. 

 

There is NO underwriting criteria.  In the eyes of the government, a law degree from Cooley is the same as a degree from Harvard.  Obviously, in the real world this is not the case...

 

My suggestion would be to let the free market decide what, if any, level of student loans should be allowed.  Also make the loans dischargeable after a period of time, say 4-5 years.

 

Gambling debt is able to be discharged...many loans are made on little or no collateral that are also able to be discharged.  Why should student loans be any different?

 

If you think students should NOT be allowed to bankrupt, I would suggest that NOBODY be allowed to bankrupt.  Bring back the debtor's prisons :)  REMEMBER, people that take out business loans are grown adults, they should suffer the consequences of their actions...

[DoddDisciple]

College is one of the most intelligent businesses out there if you think about. On an economic level, you can and a lot of students do use federal loans to pay for food, housing, and resort (oops, I mean college) amenities. Teaching doesn't even enter the picture. One of the recent offerings at most schools are 24 hour "writing help." They don't want anyone to leave and lose out on that government gravy.

 

Oh, and I really like how most schools are requiring students to have insurance via Obamacare and, guess what, they can buy through the school and use student loans :)

 

The beauty is that I know PhDs in vector borne pathology who could have done their labwork with just a few undergraduate classes or some on the job training. STEM definitely isn't excluded from the fluff. Maybe they'll start offering PhD's in janitorial science soon.

 

The fact of the matter is that as a society, there are at least 3 landmines that are drilled into our heads through advertising: automobiles, accommodations (housing), and academics. Screwing up and overpaying on anything of these can either set you back significantly or retard your economic power for life.

[SharperDingaan]

Not sure re the US, but in Canada there are loan forgiveness programs, contingent on your working in a underserviced part of Canada for a minimum length of time. ie: work in Tuk as a doctor, dentist, nurse for 4 years - & the fed/province will pay off a portion of your student loans.

 

There are lots of ways out from under a student loan, but little Suzy/Johnny have to get creative - & grow up.

 

SD

[CorpRaider]

As Munger has said, I never cease to be amazed at the power of incentives.  I think the US has got to rework the incentives so that impoverished persons are not financially incentivized to procreate beyond replacement numbers (i.e. you only get additional welfare and EBT, refundable tax credits, all forms of governmental support for the first two kids).  We also need to liberalize parental leave and other incentives (like the scandinavians do) for those who are well suited to create and raise kids who are not products of poverty.  This will become ever more important as robotics and computers make labor scarcity an antiquated concept.