The $71 Billion Parent Loan Problem

Paying for College
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@Spencek - No, the debt problem expands beyond personal into national. We’re talking about debt that is guaranteed by the federal government. If people routinely borrow hundreds of thousands of dollars and the default on those loans, that is money that taxpayers have to pay for instead - it doesn’t come out of thin air. And even people who can barely repay their debt are a problem; high overall average debt can depress the economy because everyone tightens their belts. If you run a small hotel and suddenly no one is going on vacation, then you lose. If you run a construction company that specializes in houses and no one can afford to move or build a new house because they are swimming in debt, you lose.

The vast majority of Americans will never be able to get into Penn or any of the other no-loan aid schools. Most schools don’t guarantee to meet 100% of financial need.

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Costs incurred by the University should be the focus. Having courses that exist to fatten up a 4 year curriculum is detrimental to both the quality and experience of the students. For example, why should a Univ mandate a language course or a social diversity course as part of the requirements, when the major is something like Math or Biology…? Those type of courses should all be just grouped as potential electives… Anything that the student takes outside of their core department should be considered an elective… and not a requirement.
The result will be that extraneous courses will be reduced or eliminated, while the students can complete their majors in 3 years ! The whole fat 4-year structure is archaic and needs to revisited on a major-by-major basis. It seems to be a randomly fixed standard fo

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The Bloomberg article did not mention what mayor she pursued. Some mayors aren’t marketable. I am afraid that is the case.

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Because the university is certifying that the student has a college level education, that the student can write a decent sentence, that the graduate has been introduced to other languages and cultures. A biologist may need to know that a certain virus is more common in Paris than it is in Tucson, and it’s nice to know where those places are. A math major might want to know that he can do more with his degree than just add and subtract, and that numbers don’t always tell the whole story.

Many universities have core curriculums and require a broad spectrum of classes- religion and English and biology and math, a little writing, a dab of history.

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I’m probably the minority here, but I sympathize with the colleges; the business model upon which American universities amassed their world-wide reputations is crumbling. It was based on the existence of an upper-middle class capable of paying for private college educations for their children while working thirty years at the same company and retiring on a pension to which they made modest contributions over years. That market has been slowly imploding over the space of the last quarter century. Most Americans can expect to change jobs five or six times in their lifetimes, through no fault of their own with not nearly enough time at any given place for a pension to vest (even assuming their companies have them.) The money that a generation ago might have been used to finance the sticker price of a brand new car every few years or a year’s tuition at Harvard, now must go toward the parents 401k. Parent Plus loans might as well be called, “legacy loans” because that’s the only way a lot of Ivy League alumni can afford their kid’s educations.

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@circuitrider I could not agree more

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I learned of a family once that had taken out their max amount of loans on the first two kids and the third was left out to deal with it himself. Poor kid went from lounging senior year to working full time plus going to college at night. Here’s something I found on this awesome website that has some pretty solid tips and advice for parents wanting to save up as much money as possible: http://www.collegecultured.com/2015/05/05/college-advice-for-parents/

Hey, if your child ends up getting in with merit or need based scholarships, then use this fund for your own vacations!!

48

I was chatting with one of the dental assistants yesterday, while waiting for D to get her dental checkup… Her D pays OOS tuition at a big state U, but got a merit scholarship, and the parents had the rest saved up… But she was telling me of a family friend’s D who attended Indiana University , OOS, got no merit, no financial aid; and plans to take 120k+ in loans - apparently nothing was saved, and it’s all being financed with loans - to get a degree in Fashion Merchandising. !!!

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State universities are rather highly subsidized by the state taxpayer and do not have infinite seats, especially if they want to keep up their academic standards and provide a good educational experience (for example many admit-everyone community colleges have abysmal completion rates and provide limited utility to their students).

The trades are obviously a good place for people to go that are not academically oriented and want to make a good living. You get paid even as an apprentice, so should not be in wild debt. Countries like Germany have highly skilled craftsman, technicians, etc that make high value goods for sale in the world economy, and a robust middle class.

I think calling state schools diploma mills is remarkably unfair. If your snowflake is so special as to be too special for your state flagship or even #2 school, go knock yourself out and pay full-fare at a private school. But this is a small fraction of the educational market … maybe the top 200 schools are better than an average state school.

Community colleges seems to have a broad range of quality, I think partially because it is not a homogeneous group. A feeder school for Berkeley is just nothing like an urban CC that is trying to remedy 12 years of poor public schools as well as major socioeconomic issues.

Maybe the issue is that the government should not guarantee bad debt. You can broaden the criteria, certainly beyond the almost impossible mortgage qualification, and offer some money to students with potential, some money to parents who are willing to forgo some luxuries to give their kids a boost, and then more money to parents who can pay back the loans (but at that point, why would these parents not take conventional loans with normal bankruptcy rules).

And all this talk about massive debt is likely making some people kind of buy the McMansion of education. If there is massive loan forgiveness, why not send snowflake to that private school with the lazy river and glossy brochure or send that really marginally capable kid to community college with no prospects. Sort of the “squeeze money out of a rock” idea, the taxpayer will never get some, many, most of these people to repay their loans … so what is the endgame ?

If the taxpayer is subsidizing education, rather than an enormous loan industry, it would seem like you could focus money on schools that are actually serving their students and you could draw … gasp … a line as to how low you will go with standards. Or say have a pre-college prep school like a community college, but one that really brings underpriviledged kids to a normal college standard through extensive tutoring or whatever.

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In today’s newspaper, “Student Debt Relief is a Growing Perk” by Jackie Crosby, Minneapolis Star Tribune. “A growing number of companies are dangling a recruitment perk that is tailor-made for the millennial generation: debt relief.”

Nearly 7 in 10 recent college graduates owe money, according to the Institute for College Access and Success. Half say they would rather have their company make loan payments than contribute toward their health care or retirement. Yes, these are people 24 years old - who are thinking of immediate issues, not retirement. However do not go w/o health insurance - the leading cause for bankruptcy is medical debt.

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The cost of education in the United States is beyond absurd. The predatory financing is merely an accessory to that absurdity. Fee rates and funding for public tuition should be considered at a federal level and uniformly administered regardless of the university’s ‘prestige’. That way selectivity would be focused on scholastic merit instead of bloated costs and superfluous non-academic ‘services’. Indexed federal loans with flexible income-threshold repayment options should be implemented to cover the cost of tuition, with caps imposed to match typical tertiary trajectories.

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And the cost of such changes would be astronomical, especially when you factor in the cost of the federal requirements and oversight that will be built into this sort of system …

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Works for Australian universities, which include numerous top-100, top-50, and even a top-20 world ranked school. Commonwealth supported fees, set by the government, provide some fee uniformity regardless of the school’s prestige. There are other fee mechanisms that I am not fully familiar with, and indeed international fees are high, but access to education here does not require an intergenerational burden or even parental consideration. The system is simply founded on academic, not financial, merit.