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- Thread starter Nittany Ned2
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That is the exact reason why I will not take out a student loan for my kids. We are using a home equity line of credit. You never know what may happen and the fact that you can't get that debt forgiven makes it a very scary proposition.
As someone who spent nearly a decade working for (at that time) the largest student-loan originator in the country (a very large bank everyone has heard if) i feel qualified in saying you are absolutely incorrect.
The HEA of 1965 and its Federal Family Education Loan Program allowed students, me included, to pay for their college education.
A) without federal/state guarantees - no bank would have extended credit to a typical 18yr old w/o any dort of credit history...
B) back in the 70s and 80s when interest rates, in general, were ridiculous - no lender would make loans in the 6-10% range without government subsidies that made college loan borrowing affordable...
Unfortunately, there were provisions included in the original law (written into the body of law via , i must speculate, by certain business influences) that provided access to the federal program by for-profit schools... i used to chuckle looking through the DOE school# catalog for schools like San Deigo Golf Academy, Swedish Institute of Massage, Photon School of Welding, hell - even the Joe Paterno School of Beauty in NJ had a DOE school # which allowed their “students” to request up to $2,625 each year in Stafford loans...
Crazy default-rates were driven by these bogus for-profit schools, likewise DeVry and ITT.... most of these schools were later cut-off from the program accordingly....
The rampant inflation in tuition is driven primarily by administrative flab and excessive spending .... likewise by a supply/demand model that has been tampered with by smoke & mirrors by administrators and eventually will bite them in the ass when the bubble bursts
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anon_xdc8rmuek44eq
Guest
This won’t work because guess what? People change majors. That said, the cost of a history degree shouldn’t be the same as the cost of an engineering degree. If you allow banks to dictate the professions of students, you’ll have unemployed engineers everywhere.
There was a story recently about some stud softball player in Alabama whose parents got divorced solely so she could transfer to a specific high school.
You're missing the point. By making an almost unlimited lending pool available, the balance between supply and demand has been distorted. The pie for which these colleges and universities were competing has continued to get bigger and bigger. Rather than compete on value, keeping costs reasonable, they treated their customers like they can all afford a 5*, all inclusive resort and designed their universities to attract them.
Money became no object. Tuition rates rose accordingly. That would have never happened without government's meddling.
That's like blaming alcoholism solely on distillers.
I'm not offended, R. What's a message board for other than a chance to air some ridiculous ideas?
Obviously there's no chance of this happening and if it did, it would shake American higher education to the core, including my alma mater and the place where my Dad was on the faculty for 30 years.
But what does it say about that higher education system, what does it say about PSU, that it is completely dependent on this giant mountain of artificially created debt, debt that wouldn't exist without the non-dischargeability distortion built into the bankruptcy law.
There is something really immoral about financing your institution by taking a clueless 17-year-old and his starry-eyed loving parents and having them sign papers that will hook that kid up to debt that very well may ruin his life and prevent his parents from enjoying the retirement they planned.
It's the very definition of predatory lending. And Penn State and all these colleges rationalize it because it pays.
There are two sectors of the American economy where costs are so out of control they are threatening the financial well being of hundreds of millions of people. Health care and higher education.
And in both cases there are market distortions and monopolies pushing prices up. Non-dischargeability is one of the biggest market distortions and if you eliminated it, pricing would be pulled back to equilibrium.
Obviously there's no chance of this happening and if it did, it would shake American higher education to the core, including my alma mater and the place where my Dad was on the faculty for 30 years.
But what does it say about that higher education system, what does it say about PSU, that it is completely dependent on this giant mountain of artificially created debt, debt that wouldn't exist without the non-dischargeability distortion built into the bankruptcy law.
There is something really immoral about financing your institution by taking a clueless 17-year-old and his starry-eyed loving parents and having them sign papers that will hook that kid up to debt that very well may ruin his life and prevent his parents from enjoying the retirement they planned.
It's the very definition of predatory lending. And Penn State and all these colleges rationalize it because it pays.
There are two sectors of the American economy where costs are so out of control they are threatening the financial well being of hundreds of millions of people. Health care and higher education.
And in both cases there are market distortions and monopolies pushing prices up. Non-dischargeability is one of the biggest market distortions and if you eliminated it, pricing would be pulled back to equilibrium.
I don’t think you have laid out the full economic landscape. While lenders will pull back because they’re not “guaranteed” their payment stream, there will be entry on the demand side from some folks that were scared that they couldn’t erase the debt in bankruptcy. And it’s hard to tie student lending to academic major/prospects for a healthy future repayment stream. The market clearing price might be scary. It’d be interesting to see where that excess credit goes as well. This is not a higher ed issue only for sure.
The problem with the current student loan system is that the risk is borne entirely by the student (and in many cases student's family). You enroll in a degree program that doesn't have adequate job prospects, too bad -- you have debt for the rest of your life. You enroll in an institution where you withdraw because the coursework is terrible and the staff treat your badly -- too bad, you still have to pay back every penny with interest.
If the institutions and banks had to share even a LITTLE bit of the risk, the dynamic would be different. Maybe Penn State wouldn't offer degrees at $1200 a credit that have absolutely no job prospects, or at least they wouldn't be financing these degree programs by loading up students with a lifetime of debt. Right now, there's very little incentive for the institutions to clean up their act.
If a program enrolls gullible students and makes money, it's a go regardless of how terrible the job placement numbers are (you just falsify the job placement numbers -- ask Temple's MBA program how it's done). If the institution had to pay just 10% of the outstanding debt of students who can't get jobs, things might change.
If the institutions and banks had to share even a LITTLE bit of the risk, the dynamic would be different. Maybe Penn State wouldn't offer degrees at $1200 a credit that have absolutely no job prospects, or at least they wouldn't be financing these degree programs by loading up students with a lifetime of debt. Right now, there's very little incentive for the institutions to clean up their act.
If a program enrolls gullible students and makes money, it's a go regardless of how terrible the job placement numbers are (you just falsify the job placement numbers -- ask Temple's MBA program how it's done). If the institution had to pay just 10% of the outstanding debt of students who can't get jobs, things might change.
Keeps getting better and better, but let's draw this to a conclusion. In situations where kid: a) flunks or drops out; b) receives a degree with lousy grades; or c) receives a degree with mediocre to very good grades, but can't get a job or into a post-graduate program how is liability apportioned?
I dunno but right now the institutions have zero liability and couldn't care less. If someone is dumb enough to borrow $120,000 to earn a degree in Women's Studies at Penn State, the folks at Shields will be only too happy to draw up the paperwork.
Penn State gets all the money and no consequences for the kid's financial ruin. The one thing Penn State would never say is, you can't afford this, go to community college or use your public library.
I suspect if you talked to PSU about it you would get the "adult education" argument -- college is good for its own sake. Someone with a women's studies degree is a better human being for it, job prospects be damned.
That argument seems rather self serving when you're charging $40,000 a year and having your students essentially put it on a Visa card.
Penn State gets all the money and no consequences for the kid's financial ruin. The one thing Penn State would never say is, you can't afford this, go to community college or use your public library.
I suspect if you talked to PSU about it you would get the "adult education" argument -- college is good for its own sake. Someone with a women's studies degree is a better human being for it, job prospects be damned.
That argument seems rather self serving when you're charging $40,000 a year and having your students essentially put it on a Visa card.
So you would have all universities reduce themselves to trade schools in an extension of the nanny state.
