WTF? Govt rewarding bad behavior Part II

[Anonymous]

Hey, it's not like college tuition increases have been all that small over the past 20 years.

Does 22:07 really want debt to saddle college grads forever? Because, you see, that does seem to be what he's advising.

Like it or not, we're always going to have dumbasses who are unable to live within their means and/or do not have the drive to seek gainful employment. Either they ring up $50-$100k in debt to get a BA in Gay Chicano Studies, ring up $1mn of mortgage debt on $150k HHI, or whatever.

We can either: (1) pay to keep them quiet and get their less dumbass offspring into the productive class, (2) pay for the security apparatus to keep them away from us, or (3) jostle each other out of the way to get on the boats/planes that'll take us away from Madame Defarge.

I will say this: anyone whose parents put them through college has ZERO right to make fun of the student loan slaves.

[Anonymous]

PP You seem to be missing the point. This plan will not curtail tuition costs. In fact, it will drive costs up. All it really does is shift the burden to the taxpayers down the road. I don't see how providing what is in essence free tuition is going to help our society or guarantee that these same individuals will not end up on the public doll. How many overpriced liberal arts majors, attorneys, etc do we need?

I paid my own way through school (working throughout the school year and 2 jobs in the summers) so under your scenario I do get to complain. Under Obama's plan, I, as a parent, will have no incentive to help my child with tuition costs. He/she can borrow heavily, pay back little and I can funnel the money that I would have otherwise used for tuition to help out in other ways. The taxpayers will pick up the costs. My DC will learn nothing of responsible choices and may or may not end up with a diploma that will enable said child to earn a living. Good thing I will have that former tuition nest egg to bail the kid out.

[Anonymous]

I know, why don't we just have the taxpayers foot the bill for everything that we want?

[takoma]

I don't have a well-formed opinion on this particular policy, but here's a point I have not noticed in the discussion yet (although I have not been watching that carefully):

The easier we make it for kids to stay in college, the later they enter the job market and the easier the unemployment problem is.

BTW, at the other end, raising the retirement age may help Social Security finances, but it exacerbates unemployment.

[Anonymous]

The easier we make it for kids to stay in college, the later they enter the job market and the easier the unemployment problem is.

The problem with these programs is that they never go away. What looks like a solution for what is hopefully a temporary problem just becomes another very expensive entitlement program.

Simply keeping kids in college (ultimately at the taxpayers expense) isn't going to ensure that they will be earning degrees that will enable them to obtain gainful employment.

While we do need to find ways to keep college costs down, this program will drive costs up. With the cap on repayment and earlier forgiveness, universities will continue to make increases knowing that students will just borrow more. There is no incentive for anyone to be financially responsible.

[Anonymous]

The easier we make it for kids to stay in college, the later they enter the job market and the easier the unemployment problem is.

The problem with these programs is that they never go away. What looks like a solution for what is hopefully a temporary problem just becomes another very expensive entitlement program.

Simply keeping kids in college (ultimately at the taxpayers expense) isn't going to ensure that they will be earning degrees that will enable them to obtain gainful employment.

While we do need to find ways to keep college costs down, this program will drive costs up. With the cap on repayment and earlier forgiveness, universities will continue to make increases knowing that students will just borrow more. There is no incentive for anyone to be financially responsible.

[Anonymous]

takoma wrote:I don't have a well-formed opinion on this particular policy, but here's a point I have not noticed in the discussion yet (although I have not been watching that carefully):

The easier we make it for kids to stay in college, the later they enter the job market and the easier the unemployment problem is.

BTW, at the other end, raising the retirement age may help Social Security finances, but it exacerbates unemployment.

Does it? I genuinely don't know the answer to this. In my own life, almost everyone I know up to about age 75 is still working because they can't afford true retirement. That is, unless they are disabled and/or very sick.

[Anonymous]

Anonymous wrote:PP You seem to be missing the point. This plan will not curtail tuition costs. In fact, it will drive costs up. All it really does is shift the burden to the taxpayers down the road. I don't see how providing what is in essence free tuition is going to help our society or guarantee that these same individuals will not end up on the public doll. How many overpriced liberal arts majors, attorneys, etc do we need?

I paid my own way through school (working throughout the school year and 2 jobs in the summers) so under your scenario I do get to complain. Under Obama's plan, I, as a parent, will have no incentive to help my child with tuition costs. He/she can borrow heavily, pay back little and I can funnel the money that I would have otherwise used for tuition to help out in other ways. The taxpayers will pick up the costs. My DC will learn nothing of responsible choices and may or may not end up with a diploma that will enable said child to earn a living. Good thing I will have that former tuition nest egg to bail the kid out.

My parents contributed under $1,000 of my education costs (I think they wrote a couple of deposit checks but otherwise it was my own scholarships + loans.) My wife was able to get a nice internship for a year, and paid for George Mason out of that. I feel like thumping my bootstraps some more now.

Now on to your central point. We're already giving out 13 years of education for free, we're sort of giving 4 more years for free with this program, it seems. It's not like life is going to be a picnic for our gay Chicano studies major, he/she will be paying what amounts to a 7% surtax for 20 years or choose to make under $16k a year.

I do agree, however, that financial aid counselors who don't explore how to reduce the overall cost are as unethical as sub-prime lenders who steered everyone to sub-prime mortgages (even those who would've qualified for better loans.) While caveat emptor can apply to some extent, those who do not provide good advice are in breach of a fiduciary duty.

I'm also going to agree that many jobs that industry (and even government) *thinks* needs a college degree, said college degree probably could be replaced by a halfway-decent high school degree (instead of the crapshoot that it is today) or a 1-2 year trade education (for things like accounting, IT, etc.)

The moral hazard you cite doesn't seem to have tempered dumbasses and animal-spirited entrepreneurs/bankers in the past, it does not now, nor will it in the future -- basically people and firms will make dumb decisions with or without government. It also assume you decide to abdicate responsible behavior completely, acting like what you envision welfare recipients as acting.

[TheManWithAUsername]

Anonymous wrote:Like it or not, we're always going to have dumbasses who are unable to live within their means and/or do not have the drive to seek gainful employment. Either they ring up $50-$100k in debt to get a BA in Gay Chicano Studies, ring up $1mn of mortgage debt on $150k HHI, or whatever.

We can either: (1) pay to keep them quiet and get their less dumbass offspring into the productive class, (2) pay for the security apparatus to keep them away from us, or (3) jostle each other out of the way to get on the boats/planes that'll take us away from Madame Defarge.

We could just get out of the way and let those dumb enough to lend to dumbasses suffer the consequences. Stop guaranteeing student loans for Gay Chicano Studies and allow bankruptcy to protect against student loans.

Anonymous wrote:I will say this: anyone whose parents put them through college has ZERO right to make fun of the student loan slaves.

I didn't notice anyone doing that, but maybe I missed it. I did notice you calling them dumbasses and mockingly referring to Gay Chicano Studies. FWIW, I bought my liberal arts BA with tens of thousands in student loans.

[TheManWithAUsername]

takoma wrote:The easier we make it for kids to stay in college, the later they enter the job market and the easier the unemployment problem is.

You could look at it as a jobs program for those in the education field. I wouldn't mind it nearly as much - possibly not at all - if it just focused on the most practical fields. I'd much rather see some adult education programs or some tech certificate programs.

[Anonymous]

How about we just let people be responsible? If you take out the loan, your repay the loan. Why is that so difficult for some people to stomach?

[Anonymous]

How about we stop Government loans and tell the private loan originators that their loans will be no different then any other loan. No protection from bankruptcy and a statute of limitations for non-repayment. Bet the money would dry up fast and colleges would have to find away to lower their cost.

[Anonymous]

http://www.economist.com/node/21534792

" IN LATE 1965, President Lyndon Johnson stood in the modest gymnasium of what had once been the tiny teaching college he attended in Texas and announced a programme to promote education. It was an initiative that exemplified the “Great Society” agenda of his administration: social advancement financed by a little hard cash, lots of leverage and potentially vast implicit government commitments. Those commitments are now coming due.

“Economists tell us that improvement of education has been responsible for one-fourth to one-half of the growth in our nation’s economy over the past half-century,” Johnson said. “We must be sure that there will be no gap between the number of jobs available and the ability of our people to perform those jobs.”

In this section
»Nope, just debt
Golden acres
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Another trial
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University tuition
Lyndon Johnson
Student Loans
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To fill this gap Johnson pledged an amount that now seems trivial, $1.9m, sent from the federal government to states which could then leverage it ten-to-one to back student loans of up to $1,000 for 25,000 people. “This act”, he promised, “will help young people enter business, trade, and technical schools—institutions which play a vital role in providing the skills our citizens must have to compete and contribute in our society.”

Almost a half-century later these modest steps have metastasised into a huge, federally guaranteed student-loan industry. On October 25th the Obama administration added indebted students to the list of banks, car companies, homeowners, solar manufacturers and others that have benefited from a federal handout.

Johnson’s lending programme was altered almost straight away. The intention of providing students with an education through “business, trade and technical schools” was expanded to include the full, imaginative panoply of American education, regardless of economic utility. Interest rates and terms have all been adjusted numerous times.

The result is a shifting, difficult landscape only barely understood even by insiders. For students, the task is that much larger. They must choose between an array of products, including subsidised and unsubsidised “Stafford” loans (named after a Republican senator) via the William D. Ford loan programme (named for a Michigan congressman), loans directly from the government, “Plus” loans (for parents of dependent children) and “Perkins” loans (named after a congressman from Kentucky), plus an array of private options.

On top of all this, there are choices about how to consolidate, restructure and pay the debts. Many students are understandably overwhelmed. Deanne Loonin of the National Consumer Law Centre has one client with $300,000 in debt from a failed effort to become an airline pilot. That liability could have been reduced by a better understanding of products.


Two things, however, are clear. The size of student debt is vast (see chart), and lots of borrowers are struggling. More than 10m students took out loans for the latest academic year, according to a report issued on October 26th by the College Board, a consortium of academic institutions. Almost a third of students graduating from college, and 69% of the ones dropping out, hold debt tied to their education.

The total amount of debt is staggering. The New York Federal Reserve Bank puts it at $550 billion, but includes a footnote in the “technical notes” section suggesting this may be an underestimate. Sallie Mae, the school-loan equivalent of the housing industry’s Fannie Mae and Freddie Mac, reckons there are $757 billion-worth of outstanding loans. A bank heavily involved in the area says there is at least another $111 billion in purely private loans, and with new lending estimated in excess of $112 billion for this year alone, the total amount outstanding will surpass $1 trillion in the not-so-distant future.

Critics allege a viciously wasteful circle: the size of the loan pool expands to enable students to pay ever higher fees to schools whose costs expand because money is coming their way. That was just about sustainable in the good times, a lot harder when there are fewer jobs to be had.

Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%. By some estimates delinquency rates, an earlier indicator of stress, for student loans exceed 10%, ten times that for credit cards and car loans. Ms Loonin’s average client has a low-paying job, $30,000 of debt and is in arrears.

This is despite punitive laws to enforce repayment. In response to clever students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. In 1991 the statute of limitations for non-repayment was eliminated.

Many troubled borrowers could avoid default if they used government options to consolidate their loans and make minimum payments, says Ms Loonin, but they are unaware of the possibility. Their primary contact with the industry after being granted a loan is through collection agents who are compensated based on how much they collect, and who therefore have little incentive to explain alternatives.

There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. For now the bail-out is the bigger priority for politicians. For many years government-backed loans were distributed through banks which earned a fee and occasionally had to assume a little bit of risk, but in 2009 the business was entirely absorbed by the federal government.

The changes announced this week are designed to ease the pressure on struggling graduates. Borrowers who qualify will get payment relief, not debt relief. Their payments will be capped at 10% of income rather than 15%, but interest will continue to be applied to their underlying debt and may expand rather than contract over time. There will also be forgiveness after 20 years, rather than 25. The administration says these changes will have no cost to taxpayers. If there is one lesson of the past 46 years, it is to be dubious of that claim."

[Anonymous]

Graph from http://www.economist.com/node/21534792

[Anonymous]

The administration says these changes will have no cost to taxpayers. If there is one lesson of the past 46 years, it is to be dubious of that claim."

Well that is a crock of sh&t!