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student loan crisis

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  • Avatar nephron
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    I have been listening to Dave Ramsey and agree that the student loan crisis is really a government created crisis.   It’s a classic example of a liberal policy that sounds good on paper (eg “rent control”) that ends up harming the people that it was created to help.    By the government guaranteeing banks to loan students money, banks have no incentive to figure out if a student has any ability to pay it back.  Who cares if you are borrowing 150,000 to earn a degree in Art History (Dave usually uses German Polka dot theory or something as to not offend people)?  The bank will get their money back if you default from us taxpayers.    The college or school gets 150,000 to run a program on Art history that has little marketable value in the future.    The administrators get paid, as do the professors.   The student and the tax payer are the only one harmed.    If a bank was unwilling to loan a student 150K to obtain a degree in Art History because it was worried it would not be paid back, the student would never be “shackled” with an unmanageable loan for the next 30 years and may put more consideration into what he was obtaining a degree in, and college tuition would not be as high as it is because no one would sign up for the 150K degree in Art history and they would have to lower their price (have less new construction, less new dorms, fewer Deans, etc).   I think that all this talk from politicians about loan forgiveness and even the government programs for loan forgiveness only exacerbate the problem.  Why wouldn’t you borrow an extra 10K to stay in the single dorm room when in the back of your mind, there is a possibility that someone some day could wipe out your debt?   If there were no government loans, I think college would be lot cheaper for everybody, and there would not be student loan crisis.  I think that people could still go to school, but obviously, you would see many people commuting from home to school to go to their local community college for a few years rather then getting the on campus experience or working more during high school and college to afford it.    I think that banks would still loan students money to pursue things like medicine or advanced degrees if they thought that they were going to be paid back.

    #216603 Reply
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    Avatar snowcanyon
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    Liberal? Most more socialist/liberal countries don’t have high tuition, and therefore don’t have a student loan problem. Look at Canada, Australia, and Italy. Wouldn’t a liberal policy mean NOT having loans?

    CordMcNally CordMcNally
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    I don’t think too many people are going to disagree with your basic premise. Unfortunately, there are a lot of people who want ‘free’ college out there so politicians are going to continue to pander towards that crowd. This conversation won’t be going anywhere, along with no real solutions, any time soon.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #216606 Reply
    Vagabond MD Vagabond MD
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    Highly politicized topic. If I could do it over again, I would have been premed with an Art History major. In my 50’s, I am much more interested in art than I am in the Kreb cycle, Mendelian genetics or population biology.

    IntensiveCareBear IntensiveCareBear
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    Joined: 12/22/2018

    There have been student loans, public and private, for a long time. Part of the problem is people blindly signing them, and part of it is that universities will always charge a bit more than loan maximum for tuition+housing, loan max will rise to meet univ costs, tuition rises again.

    It is the same reason house prices or medical prices are so over-inflated. Anytime you extend huge numbers of people credit (with or without govt guarantee… but especially with), the price of the item will just keep creeping up to sit slightly over what the credit limits are. If you won’t sign your life away for a big house or graduate school, your neighbor gleefully will.

    If mortgage lending were capped at 1x gross with 30-40% down and student lending was capped at 5k per year for tuition + 3k for dorm, what do you think average home prices and average tuition+ dorm suddenly would end up? Back in the mid 20th century, you had exactly that: house prices based on single income family and tuition was reasonable for family to pay or small loans to be taken out. The college education or houses of today are no better or more expensive to produce relative to wages, but the only difference is that people now buy them almost exclusively on credit… so costs are ridiculous relative to wages.

    "Hmm, that sounds risky." - motto of the middle class

    #216609 Reply
    Avatar FIREshrink
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    There is no student loan crisis. When the Democrats seize control of government, all student loans will be forgiven. And your taxes will be raised to pay for it.

    #216615 Reply
    Avatar FIREshrink
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    Earnest refinancing bonus

    Ps. I am a lifelong Democrat, like any good psychiatrist who isn’t frankly a Communist.

    Avatar Dusn
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    Status: Physician
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    Joined: 01/02/2018

    The student loan programs have been going on for a very long time, starting with the idea that higher education would help us in the Cold War, and as far as I can tell both political parties have been involved in their creation.

    #216620 Reply
    ENT Doc ENT Doc
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    Snowcanyon, those countries don’t have high tuition because, like in medicine, they have gotten even MORE involved and price fix education and pay for it. It’s a full take over rather than a big government program like we have.

    Dusn is correct. The original HEA received overwhelming support from Republicans and Democrats, signed by Johnson. This goes to show that, like Medicare Part D, Republicans are not better at reducing the size of government despite supposed goals to the contrary. Though Democrats will, with certainty (particularly these days), increase the size and scope of government.

    The student loan crisis is no different from any other market bubble. Look at the subprime crisis and health care cost crisis. All have one unifying feature – government involvement that intended to guarantee something as a right, detached from value. For the subprime crisis it was HUD wanting everyone to have a home. With medicine it was a guaranteed payment on costs but not value. The free market guarantees nothing and maximizes overall benefit through competition on value. Sad we’ll never get to see that play out. Because another truth is that once the government gets involved their involvement only goes one way – up.

    #216656 Reply
    Avatar hightower
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    Joined: 12/07/2016

    I have been listening to Dave Ramsey and agree that the student loan crisis is really a government created crisis.   It’s a classic example of a liberal policy that sounds good on paper (eg “rent control”) that ends up harming the people that it was created to help.    By the government guaranteeing banks to loan students money, banks have no incentive to figure out if a student has any ability to pay it back.  Who cares if you are borrowing 150,000 to earn a degree in Art History (Dave usually uses German Polka dot theory or something as to not offend people)?  The bank will get their money back if you default from us taxpayers.    The college or school gets 150,000 to run a program on Art history that has little marketable value in the future.    The administrators get paid, as do the professors.   The student and the tax payer are the only one harmed.    If a bank was unwilling to loan a student 150K to obtain a degree in Art History because it was worried it would not be paid back, the student would never be “shackled” with an unmanageable loan for the next 30 years and may put more consideration into what he was obtaining a degree in, and college tuition would not be as high as it is because no one would sign up for the 150K degree in Art history and they would have to lower their price (have less new construction, less new dorms, fewer Deans, etc).   I think that all this talk from politicians about loan forgiveness and even the government programs for loan forgiveness only exacerbate the problem.  Why wouldn’t you borrow an extra 10K to stay in the single dorm room when in the back of your mind, there is a possibility that someone some day could wipe out your debt?   If there were no government loans, I think college would be lot cheaper for everybody, and there would not be student loan crisis.  I think that people could still go to school, but obviously, you would see many people commuting from home to school to go to their local community college for a few years rather then getting the on campus experience or working more during high school and college to afford it.    I think that banks would still loan students money to pursue things like medicine or advanced degrees if they thought that they were going to be paid back.

    Click to expand…

    Don’t drink the kool-aid that Fox news/Rupert Murdoch is spewing…The current student loan crisis is not the result of “liberal” politics.  Do your research before saying or believing stuff like that.

    If anything, it was bipartisan…

    The first federal student loan program was passed in 1958 by President Dwight D Eisenhower…a Republican.  National Defense Education Act of 1958

    The Higher Education Act of 1965 further expanded federal involvement in student loans through the creation of FFELP program.  It was passed by Lyndon Johnson…a democrat.

    In 1992 President Bush…a Republican, signed a pilot version of a law reauthorizing the 1965 Higher Education Act and allowing for direct lending by the Federal Govt.
    In 1993 Bill Clinton…a democrat signed the Omnibus Budget Reconciliation Act which among many other things authorized direct lending but in 1994, his congress passed another law preventing 100% direct lending.

    President George Bush “Jr” a Republican created the PSLF program, so yeah…

    In other words, our current mess is the result of decades of legislation passed by both parties

    #216672 Reply
    Avatar hightower
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    Joined: 12/07/2016

    I don’t think too many people are going to disagree with your basic premise. Unfortunately, there are a lot of people who want ‘free’ college out there so politicians are going to continue to pander towards that crowd. This conversation won’t be going anywhere, along with no real solutions, any time soon.

    Click to expand…

    I support public education and fully realize that it’s not “free” but paid for through taxes.  I have no problem paying taxes when those taxes result in programs and services that directly benefit the tax paying public.  Our National Parks System is a perfect example of this.  We wouldn’t have these amazing, wild places for all to enjoy if it weren’t for the Federal Government protecting that land.  College education paid for through taxes is another thing I would fully support as well as public transportation, public radio, public libraries, etc.  What I don’t like is when I have to pay a higher percentage of taxes on my income than billionaires and in exchange they get to use their vast wealth to game the system in their favor for decades to come.

    #216677 Reply
    Avatar hightower
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    Status: Physician
    Posts: 1501
    Joined: 12/07/2016

    There is no student loan crisis. When the Democrats seize control of government, all student loans will be forgiven. And your taxes will be raised to pay for it.

    Click to expand…

    Ps. I am a lifelong Democrat, like any good psychiatrist who isn’t frankly a Communist.

    Click to expand…

    Lot’s of Rupert Murdoch propaganda swimming around in your brain it seems…It’s funny that so many American’s don’t realize they are joining a cult when they watch Fox news

    #216681 Reply
    CordMcNally CordMcNally
    Participant
    Status: Physician
    Posts: 3074
    Joined: 01/03/2017
    I support public education and fully realize that it’s not “free” but paid for through taxes. I have no problem paying taxes when those taxes result in programs and services that directly benefit the tax paying public. Our National Parks System is a perfect example of this. We wouldn’t have these amazing, wild places for all to enjoy if it weren’t for the Federal Government protecting that land. College education paid for through taxes is another thing I would fully support as well as public transportation, public radio, public libraries, etc. What I don’t like is when I have to pay a higher percentage of taxes on my income than billionaires and in exchange they get to use their vast wealth to game the system in their favor for decades to come.

    Click to expand…

    I think everyone getting a high school education is beneficial, although I would like to see the curriculum changed a bit. I disagree that everyone getting a college education would be beneficial. There are too many worthless degrees out there.

     

    You don’t have to pay a higher percentage of taxes on your income. Billionaires make their money through capital gains. You should be mad at the system, not those who are playing within the rules of the system. I would bet that you look for ways to minimize your taxes, too. Somewhere there is probably someone making $30k who is saying the same thing about you gaming the system as you’re saying about billionaires.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    CordMcNally CordMcNally
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    Status: Physician
    Posts: 3074
    Joined: 01/03/2017

    Lot’s of Rupert Murdoch propaganda swimming around in your brain it seems…It’s funny that so many American’s don’t realize they are joining a cult when they watch Fox news

    Click to expand…

    Is there an eye roll emoji? If not, *eye roll*.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #216695 Reply
    Lordosis Lordosis
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    Status: Physician
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    Joined: 02/11/2019

    We as a society need to pick a level of education that should be appropriate for everyone.  It has been a high school degree for quite a while now.  Depending on your aspirations and talents you might have gone forward with a higher education.  Now it is almost a given that everyone “deserves” a college education.  We are very bad at self selecting if this is going to be good for us in our future career.  So if given the choice to enter the workforce or get a “free” education then enter the workforce who would turn it down?

    You should not be denied an education because you are poor and cannot afford it.  But you should not be given an education just because that is what everyone else did and more is better.

    “Never let your sense of morals prevent you from doing what is right.”

    #216712 Reply

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