Article: The U.S. Will Forgive at Least $108 Billion in Student Debt

[Ravin]

Private loans still exist. It is the government subsidized ones that are a problem, with rates and repayment.

Private loans have higher interest rates and you are at the mercy of the lender with respect to repayment regardless of ability to repay.

 

Private loans are also unavailable without very good credit and proof of income.

[Sebastian (a lady)]

Something I've seen a few articles on is the lack of risk the college takes on loans. If a student borrows more than their post-graduation employment can support, it doesn't cost the college anything. Which means there is little incentive to either curb costs or ensure students graduate with skills they need to pay back loans.

 

I also don't think plan apps consider what degree plan the student is intending. There were some long articles over the past couple years about students who took $100k+ for degrees in education or communications. The students were then shocked at their job prospects or the time it would take to pay off the loan.

 

I don't think degrees in humanities should only be for the wealthy, but I do wonder how people think it all connects (their degree choice, loan totals, job prospects).

 

I haven't attended the typical paying for college workshops on offer through schools or college fairs. I wonder if they mostly cover how to pay the college costs or if they also discuss loan terms and weighing various cost benefit decisions.

 

I also think we underestimate how confusing some loan agreements are and how underequipped some families are for things like appealing financial aid decisions.

[JanetC]

Can you link to where you found the individual school information? I'm at home and the internet we have here is way too slow to watch that video if it's on there.

I downloaded each school on DDs list from the IPEDS data center

 

http://nces.ed.gov/ipeds/datacenter/

 

Click on look up an institution, then under the financials tab.

 

I added up the sub components of core spending by hand.

[regentrude]

Something I've seen a few articles on is the lack of risk the college takes on loans. If a student borrows more than their post-graduation employment can support, it doesn't cost the college anything. Which means there is little incentive to either curb costs or ensure students graduate with skills they need to pay back loans.

 

 

I do not think the bolded is true. There are rankings of school for ROI that take cost of attendance and starting salaries into account, and colleges want to look good on those. The information is out there for students and parents to find.

 

 

I also don't think plan apps consider what degree plan the student is intending. There were some long articles over the past couple years about students who took $100k+ for degrees in education or communications. The students were then shocked at their job prospects or the time it would take to pay off the loan.

I don't think degrees in humanities should only be for the wealthy, but I do wonder how people think it all connects (their degree choice, loan totals, job prospects).

I haven't attended the typical paying for college workshops on offer through schools or college fairs. I wonder if they mostly cover how to pay the college costs or if they also discuss loan terms and weighing various cost benefit decisions.

 

My DD was required by her school to complete an online training about student loans before she was allowed to sign the paper work for her loans. The training informed her about interest, what that means for the total, the monthly payments etc. I thought this was standard nowadays?

[Bootsie]

Something I've seen a few articles on is the lack of risk the college takes on loans. If a student borrows more than their post-graduation employment can support, it doesn't cost the college anything. Which means there is little incentive to either curb costs or ensure students graduate with skills they need to pay back loans.

 

 

If I go into Best Buy and purchase a television by borrowing money that I can't afford to repay, it doesn't cost Best Buy anything.  If I buy a house from Mr. Smith and borrow money that I can' afford to pay back in the future, it doesn't cost Mr. Smith anything.  The university is not the one lending the money.  Perhaps it is the lack of the lenders concern regarding whether the money can be paid back that is at the root cause of the problem.

[Sebastian (a lady)]

If I go into Best Buy and purchase a television by borrowing money that I can't afford to repay, it doesn't cost Best Buy anything.  If I buy a house from Mr. Smith and borrow money that I can' afford to pay back in the future, it doesn't cost Mr. Smith anything.  The university is not the one lending the money.  Perhaps it is the lack of the lenders concern regarding whether the money can be paid back that is at the root cause of the problem.

 

I think given the loan amounts, a college loan is closer to a home or a car.  In both of those cases, it is more like the loan company buying the house or car until you pay off the loan.  And they have the prospect of foreclosing or repossessing the item purchased.  

 

In an education loan, there is nothing to repossess.  There is also no lemon law with education.  

 

One area where I am frustrated with the push towards college for all is that it undermines students and families looking closely at the value of a specific education for a specific student at a particular point in time.  

[Sebastian (a lady)]

I do not think the bolded is true. There are rankings of school for ROI that take cost of attendance and starting salaries into account, and colleges want to look good on those. The information is out there for students and parents to find.

 

 

 

Could you give me some suggestions on where to find this info?

[Bootsie]

 There are rankings of school for ROI that take cost of attendance and starting salaries into account, and colleges want to look good on those. The information is out there for students and parents to find.

 

One of the points in the NBER lecture is that this information is readily available for highly selective schools.   As one moves into the non-selective school category, there is a wide variety of whether this information is available from the school. Much of the data is taken from this dataset http://www.commondataset.org/   If the institution provides general stories on its website but does not provide information to the common dataset to backup claims it might be a sign that the institution does not have a good ROI. 

[Bootsie]

I think given the loan amounts, a college loan is closer to a home or a car.  In both of those cases, it is more like the loan company buying the house or car until you pay off the loan.  And they have the prospect of foreclosing or repossessing the item purchased.  

 

In an education loan, there is nothing to repossess.  There is also no lemon law with education.  

 

One area where I am frustrated with the push towards college for all is that it undermines students and families looking closely at the value of a specific education for a specific student at a particular point in time.  

Yes, with education there is nothing to repossess, which is why the government stepped into this market.  Private lenders would not be willing to make these loans without government guarantee or high rates of interest.

 

A basic issue is whose responsibility is it to determine whether a borrower is making a wise decisions when borrowing.  There is no other market in which it is the seller of the item the purchaser is purchasing is responsible for this.  The responsibility is shared between the borrower who faces the consequences of repayment and the lender who faces the risk of the lack of repayment. 

[regentrude]

One of the points in the NBER lecture is that this information is readily available for highly selective schools.   As one moves into the non-selective school category, there is a wide variety of whether this information is available from the school. Much of the data is taken from this dataset http://www.commondataset.org/   If the institution provides general stories on its website but does not provide information to the common dataset to backup claims it might be a sign that the institution does not have a good ROI. 

 

But there are ranking lists that are not published by the schools themselves - one can look at the payscale rankings. They definitely include less selective schools like the one where I work.

[regentrude]

Could you give me some suggestions on where to find this info?

 

http://colleges.usnews.rankingsandreviews.com/best-colleges/rankings plus https://www.payscale.com/college-salary-report

 

http://www.bestcolleges.com/features/best-roi-colleges/

[JanetC]

 

One area where I am frustrated with the push towards college for all is that it undermines students and families looking closely at the value of a specific education for a specific student at a particular point in time.  

 

This requires an ability to see into the future. Things can happen - sometimes they could have been forseen with research and planning, but often not.

Maybe the kid should have known that they were not cut-out for engineering, but tried to major in it anyway. But maybe a parent got cancer and the child was needed at home. Or maybe the economy just tanked when it was time to find a job.

 

Federal loans with income-based repayment and forgiveness programs help spread the risk.

 

[FaithManor]

I believe they will either fundraise to increase the scholarship pool or realign spending. Bottom line is they need students and if students can't borrow the money to go, and parents can't pay the bill, then they have to make it affordable or watch admission yileds drop dramatically. I am also all for stare schools being state funded. Michigan is barely contributing anything to U of Mi, MSU, etc. But then this state is a horrible state in terms of education funding and assisting students period. A real disaster

 

The current situation in which tuition/room/board increases have outpaced wages by over 400% for the last decade is untenable for the masses. So of the private student loan bubble is burst, the choice is to increase financial aid at the state and federal level dramatically for middle class students, increase merit aid by large amounts to a larger pool of students, or re-align spending priorities which might mean the stadium does not get bigger or any number of other things, or states get serious about funding state schools and guaranteeing much lower tuition/board rates for their citizens unless of course schools are happy to see their admission yields drop significantly.

 

But something has to give because more ans more families cannot afford this and are sending their students to community colleges, regional campuses, and online programs instead of directly to four year universities and LAC's, and more and more the talk is "How can I avoid going into significant debt for my undergraduate degree."

[Bootsie]

I believe they will either fundraise to increase the scholarship pool or realign spending. Bottom line is they need students and if students can't borrow the money to go, and parents can't pay the bill, then they have to make it affordable or watch admission yileds drop dramatically. I am also all for stare schools being state funded. Michigan is barely contributing anything to U of Mi, MSU, etc. But then this state is a horrible state in terms of education funding and assisting students period. A 

I think most state universities would welcome increased support from the state. Many have experienced a significant drop in state dollars in recent years.  The schools cannot decide to do this--it is up to the voters and state legislators to do that.  A big question is "Why have states reduced their funding of state institutions?" 

[Crimson Wife]

 

My DD was required by her school to complete an online training about student loans before she was allowed to sign the paper work for her loans. The training informed her about interest, what that means for the total, the monthly payments etc. I thought this was standard nowadays?

 

My school required me to watch a video before I could apply for ANY financial aid, including scholarships. It was a total waste of time for me personally since I'm not taking loans for my 2nd bachelor's classes, but it's good that the information is being presented to my classmates who do need to take out loans.

 

[Crimson Wife]

I think most state universities would welcome increased support from the state. Many have experienced a significant drop in state dollars in recent years.  The schools cannot decide to do this--it is up to the voters and state legislators to do that.  A big question is "Why have states reduced their funding of state institutions?" 

 

It isn't that total funding has actually dropped but rather that it has not increased proportionately with the dramatic increase in the number of students enrolled. So while per-student funding is lower, the total is actually higher.

 

And in my state, there was a political decision to shift budget resources from the UC and Cal State system to the community college system (since CC's enroll a far greater number of the state's students). That forced the 4 year schools to dramatically increase tuition while allowing the CC's to remain super-cheap (it's only $46/credit). On the one hand, I can understand the reasoning for wanting to more heavily subsidize the schools that primarily draw from a lower-income student population. But it definitely has made the UC schools in particular a lot less affordable for middle-class families.

[regentrude]

It isn't that total funding has actually dropped but rather that it has not increased proportionately with the dramatic increase in the number of students enrolled. So while per-student funding is lower, the total is actually higher.

 

Not true in all states. In our state, the absolute dollar amount public universities received was cut. So, simultaneously, schools got less absolute money AND student numbers increased by significantly on top of it.

[Crimson Wife]

Not true in all states. In our state, the absolute dollar amount public universities received was cut. So, simultaneously, schools got less absolute money AND student numbers increased by significantly on top of it.

 

Compared to when? I'd be surprised if the absolute dollar amount in inflation-adjusted terms is lower than it was 20 years ago.

 

ETA: You can find the trendline for your state here (click on the little yellow graph icon): http://www.higheredinfo.org/dbrowser/index.php?submeasure=81&year=2011&level=nation&mode=data&state=0#/-1/

Edited December 5, 2016 by Crimson Wife

[Crimson Wife]

Clicking on a couple of states that critics claim have "gutted" their higher education spending, KS and WI, I still see higher absolute totals than '96. Though it is very true that the larger pot of funding is spread more thinly since there are far greater numbers of students enrolled.

[Bootsie]

In the past decade, some states have seen decreases in absolute amounts.  I think Louisiana and Texas fall in this category. 

[regentrude]

Compared to when? I'd be surprised if the absolute dollar amount in inflation-adjusted terms is lower than it was 20 years ago.

 

In 2001, our state provided 41% of our university's revenue; in 2011 it was only 23%. This means that state funding was cut by 44% as a percentage of the total revenue, while enrollment increased by 54% in the same time span.

 

The departments were force to make drastic cuts and were not allowed to hire replacements for retired faculty.

 

Inflation adjusted, it is even worse. ""We fund higher education in this state nearly $300 million inflation-adjusted dollars less than we did at the turn of the century 15 years ago,"

Edited December 5, 2016 by regentrude

[creekland]

Compared to when? I'd be surprised if the absolute dollar amount in inflation-adjusted terms is lower than it was 20 years ago.

 

ETA: You can find the trendline for your state here (click on the little yellow graph icon): http://www.higheredinfo.org/dbrowser/index.php?submeasure=81&year=2011&level=nation&mode=data&state=0#/-1/

 

Hmm, in per capita spending PA is 5th worst.  I know if we try hard we can probably lead that category...  :glare:

 

Beating us are RI, VT, CO, and NH.

 

I guess it's not too amazing that decent students from our state often can get better (or equally as good) offers from private colleges.

[Bootsie]

If you look at the total amount of state and local support for the entire nation between 2008 and 2011, you see that this number has dropped in absolute terms (I think for some states the past 5 years have seen an even larger drop in absolute funding).  

[regentrude]

Compared to when? I'd be surprised if the absolute dollar amount in inflation-adjusted terms is lower than it was 20 years ago.

 

ETA: You can find the trendline for your state here (click on the little yellow graph icon): http://www.higheredinfo.org/dbrowser/index.php?submeasure=81&year=2011&level=nation&mode=data&state=0#/-1/

 

And the graph you linked shows a distinct decrease of absolute funding nationwide in the years leading up to 2011.

[Crimson Wife]

In 2001, our state provided 41% of our university's revenue; in 2011 it was only 23%. This means that state funding was cut by 44% as a percentage of the total revenue, while enrollment increased by 54% in the same time span.

 

Just because percentages of the budget have shifted does NOT mean the state is providing a lower absolute amount. Here's an analogy: let's say my DH's salary remains the same but I resume paid employment and our spending goes up. His SHARE of our family's revenue has decreased despite him providing the same amount of money.

 

Give me inflation-adjusted dollar figures, not meaningless percentages of the budget.

[Crimson Wife]

And the graph you linked shows a distinct decrease of absolute funding nationwide in the years leading up to 2011.

Again, compared to when? There are ups and downs but the overall historical trend is up. Just not as far up as it should have gone if per-student funding were to remain constant. 

[Bootsie]

Again, compared to when? There are ups and downs but the overall historical trend is up. Just not as far up as it should have gone if per-student funding were to remain constant. 

In 2008 total for the nation was 80.7 billion; by 2011 it was only 78.4 billion.  It appears that these are in nominal dollars.  Add to that the fact that the return that many universities are earning on their endowment funds has been extremely low in the past decade, this is a significant decrease in funding.

[Sebastian (a lady)]

http://colleges.usnews.rankingsandreviews.com/best-colleges/rankings plus https://www.payscale.com/college-salary-report

 

http://www.bestcolleges.com/features/best-roi-colleges/

I'm skeptical of the Payscale rankings. For example they keep listing SUNS on top, but the fine print points out that active duty military pay is excluded. But most heads have 5 years active duty committment on graduation, which makes me question how many grads are in the starting pay salary pool.

Pay scale also doesn't seem to differentiate between degrees. Is it better to have an English degree from Harvard or a biology degree from University of Virginia?

 

Similarly is it better to have a general engineering degree with a 3.0 gpa or a history degree with a 4.0 or a chemical engineering degree with a 2.3?

Edited December 6, 2016 by Sebastian (a lady)