5 ms·

> If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come do

by eggie 7y ago

> If universities had to worry about students defaulting, they would get rid of bullshit degrees that don't result in an actual job and the prices would come done due to free market forces. This is a hypothetical but classic example of how regulation is required to support a free market.

roenxi 7y ago
A free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets. There is no free market here.
- bumby 7y ago
  I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years. Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of
  - docdeek 7y ago
    Australia has a version of this sort of thing, except the 'bank' extending the loan is the government. When a student graduates they repay their education 'loan' with a slightly increased rate of income tax until the loan is repaid in full. There are a couple of other features of the loans that make them different from commercial loans in that the effective rate of interest is 0% (it's tied to inflation, but no interest clock is ticking) and repayments are only required once a graduate reaches a certain income threshold (hence, if you leave the workforce and stop earning income you don't have to pay, and you don't pay if you are unemployed or seeking a job straight out of college).
  - bocklund 7y ago
    This is how some of the coding boot camps like Lambda School work.
  - RickJWagner 7y ago
    I can imagine the graduated students would quickly become indignant and look for ways to default. Sort of like those radio ads that say they'll help you "not pay the greedy credit card companies that trapped you".
  - Nasrudith 7y ago
    That reminds me of the Paradox of the Court. Obviously not quite as straightforward but such a payment model does encourage at least some degree of sandbagging. https://en.m.wikipedia.org/wiki/Paradox_of_the_Court https://en.m.wikipedia.org/wiki/Paradox_of_the_Court On another note the idea rubs me as immoral in ways that loans don't for reasons I am not quite able to articulate. Like viscerally seeming too far too similar to indenteture.
    - bumby 7y ago
      Interesting link, thanks for sharing! I found a link but couldn't add it to my original comment. There is a 5% salary payment for 15 years once the student reaches $25k. Sandbagging is possible but it seems like students would start working against their own monetary self-interest pretty early (from a salary perspective at least; who knows, I'm sure there's other creative ways to game the system).
    - int_19h 7y ago
      Indenture is loathsome because the person under it is compelled to work. That isn't so in this payment model - they're free to work or not as they wish, and they are free to choose the amount of work, and their own balance of pay vs working conditions, and so on.
  - bumby 7y ago
    Found a link. Basically, if someone makes more than $25k they owe 5% of their income for 15 years: https://nationswell.com/venture-capital-college-student-debt-13th-avenue-funding/ https://nationswell.com/venture-capital-college-student-debt...
  - ipsi 7y ago
    Student Loans in the UK can work like this - you repay, I think, 9% above £25,000, and it's wiped after 30 years, regardless of how much is left. Some details may be different depending on exactly when the loan was issued. So if you have a huge loan but a small income, it's more like a 30-year graduate tax than a loan you expect to fully repay.
    - bumby 7y ago
      I think the difference (if I'm understanding the U.K. situation correctly) is that in the U.K. the loan can be paid off in full prior to the end of the term, correct? In the situation above, it acts more like an investment rather than a loan. (i.e., there's no upper bound on the payment, outside of the 5%/15 year cap, so the student may pay back more than they receive)
- lr4444lr 7y ago
  That's why the loans are not dischargeable in bankruptcy. Awful state of affairs, but it is an effective thing to leverage.
- linuxftw 7y ago
  > They have no money or assets. That's entirely the point. Tuition would have to come down so it's actually affordable, or there would be less people attending. Businesses might actually foot the bill for tuition to train their people, because there would be a shortage of qualified applicants.
yaa_minu 7y ago
Where's the free market here? As far as I know, student loans are guaranteed by the government so the universities are not incentivized to keep the cost down because no matter how much they charge, students can "afford" to pay.
throwaway100773 7y ago
How so? I don’t see the connection here.
moduspol 7y ago
It's federally guaranteed student loans that got us here! It wasn't like this for our parents. This comment is an example of how any amount of problems caused by government intervention can be framed as a need for more government intervention.
- alistairSH 7y ago
  <pedant>The predecessor of the Stafford Loan program was created in 1965, so it was like this for most of our parents.</pedant> But, the cost of school has outpaced inflation for that period, making the situation worse. No question about that. We'd probably all be better off if the government simply gave grants to students who meet some minimum threshold. Call it top 20% of class or thereabouts.
  - raverbashing 7y ago
    "cost of school" oh but wait, it's not the cost of tuition as in the people and materials actually involved in it. Just ask any professor. It's the cost of the administration. The cost of facilities. The extortion racket that are mandatory latest editions textbooks. Universities are becoming less about teaching people and more about capturing grants and "selling the experience"
    - alistairSH 7y ago
      Most of those administrators are there for a reason. Regulatory compliance takes manpower (which costs money). Perhaps we regulating the wrong things, or doing too much of it. But, regulations rarely appear for no reason at all. Some states are making efforts to curb the costs of textbooks and materials. I'm currently working on software to help CA schools roll out their ZTC programs.[1] 1 - https://www.insidehighered.com/digital-learning/article/2019/09/19/california-community-colleges-implement-zero-textbook-cost https://www.insidehighered.com/digital-learning/article/2019...
- Frondo 7y ago
  It sure wasn't like this for our parents. The UC system was close to free in the 60s. Portland State University's very first summer session was $50 for tuition and fees. Universities supported simply by taxes, not a byzantine system of public and private loans (still backed by the government, of course), like is common in other Western nations. I'm 100% in on getting the government out of the lending business and back into the "higher ed is a public good" business. I'd rather they just return the actual sticker price to what it was a generation ago, and make it realistic for people to work student jobs to earn the cost of their tuition.
dsfyu404ed 7y ago
Is the regulation you're speaking of regulation that un-does the regulation that provides federal loan to anyone with a pulse who wants to major in journalism (or some other degree for a low paid field) and prevents borrowers from getting rid of said loans in bankruptcy? Make no mistake, we regulated ourselves into this mess. Many people at the time predicted the current situation. More money chasing something drives up the price of that something. It's now pretty clear that we should have funded the schools instead of providing subsidized loans for the students.
jbc1 7y ago
Could you elaborate please?

by eggie 7y ago

roenxi 7y ago

A free market? Nobody but nobody would be stupid enough to lend money to students in a free market. The student would be an infeasible credit risk. They have no money or assets. There is no free market here.

bumby 7y ago
I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years. Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of
- docdeek 7y ago
  Australia has a version of this sort of thing, except the 'bank' extending the loan is the government. When a student graduates they repay their education 'loan' with a slightly increased rate of income tax until the loan is repaid in full. There are a couple of other features of the loans that make them different from commercial loans in that the effective rate of interest is 0% (it's tied to inflation, but no interest clock is ticking) and repayments are only required once a graduate reaches a certain income threshold (hence, if you leave the workforce and stop earning income you don't have to pay, and you don't pay if you are unemployed or seeking a job straight out of college).
- bocklund 7y ago
  This is how some of the coding boot camps like Lambda School work.
- RickJWagner 7y ago
  I can imagine the graduated students would quickly become indignant and look for ways to default. Sort of like those radio ads that say they'll help you "not pay the greedy credit card companies that trapped you".
- Nasrudith 7y ago
  That reminds me of the Paradox of the Court. Obviously not quite as straightforward but such a payment model does encourage at least some degree of sandbagging. https://en.m.wikipedia.org/wiki/Paradox_of_the_Court https://en.m.wikipedia.org/wiki/Paradox_of_the_Court On another note the idea rubs me as immoral in ways that loans don't for reasons I am not quite able to articulate. Like viscerally seeming too far too similar to indenteture.
  - bumby 7y ago
    Interesting link, thanks for sharing! I found a link but couldn't add it to my original comment. There is a 5% salary payment for 15 years once the student reaches $25k. Sandbagging is possible but it seems like students would start working against their own monetary self-interest pretty early (from a salary perspective at least; who knows, I'm sure there's other creative ways to game the system).
  - int_19h 7y ago
    Indenture is loathsome because the person under it is compelled to work. That isn't so in this payment model - they're free to work or not as they wish, and they are free to choose the amount of work, and their own balance of pay vs working conditions, and so on.
- bumby 7y ago
  Found a link. Basically, if someone makes more than $25k they owe 5% of their income for 15 years: https://nationswell.com/venture-capital-college-student-debt-13th-avenue-funding/ https://nationswell.com/venture-capital-college-student-debt...
- ipsi 7y ago
  Student Loans in the UK can work like this - you repay, I think, 9% above £25,000, and it's wiped after 30 years, regardless of how much is left. Some details may be different depending on exactly when the loan was issued. So if you have a huge loan but a small income, it's more like a 30-year graduate tax than a loan you expect to fully repay.
  - bumby 7y ago
    I think the difference (if I'm understanding the U.K. situation correctly) is that in the U.K. the loan can be paid off in full prior to the end of the term, correct? In the situation above, it acts more like an investment rather than a loan. (i.e., there's no upper bound on the payment, outside of the 5%/15 year cap, so the student may pay back more than they receive)
lr4444lr 7y ago
That's why the loans are not dischargeable in bankruptcy. Awful state of affairs, but it is an effective thing to leverage.
linuxftw 7y ago
> They have no money or assets. That's entirely the point. Tuition would have to come down so it's actually affordable, or there would be less people attending. Businesses might actually foot the bill for tuition to train their people, because there would be a shortage of qualified applicants.

yaa_minu 7y ago

Where's the free market here? As far as I know, student loans are guaranteed by the government so the universities are not incentivized to keep the cost down because no matter how much they charge, students can "afford" to pay.

throwaway100773 7y ago

How so? I don’t see the connection here.

moduspol 7y ago

It's federally guaranteed student loans that got us here! It wasn't like this for our parents. This comment is an example of how any amount of problems caused by government intervention can be framed as a need for more government intervention.

alistairSH 7y ago
<pedant>The predecessor of the Stafford Loan program was created in 1965, so it was like this for most of our parents.</pedant> But, the cost of school has outpaced inflation for that period, making the situation worse. No question about that. We'd probably all be better off if the government simply gave grants to students who meet some minimum threshold. Call it top 20% of class or thereabouts.
- raverbashing 7y ago
  "cost of school" oh but wait, it's not the cost of tuition as in the people and materials actually involved in it. Just ask any professor. It's the cost of the administration. The cost of facilities. The extortion racket that are mandatory latest editions textbooks. Universities are becoming less about teaching people and more about capturing grants and "selling the experience"
  - alistairSH 7y ago
    Most of those administrators are there for a reason. Regulatory compliance takes manpower (which costs money). Perhaps we regulating the wrong things, or doing too much of it. But, regulations rarely appear for no reason at all. Some states are making efforts to curb the costs of textbooks and materials. I'm currently working on software to help CA schools roll out their ZTC programs.[1] 1 - https://www.insidehighered.com/digital-learning/article/2019/09/19/california-community-colleges-implement-zero-textbook-cost https://www.insidehighered.com/digital-learning/article/2019...
Frondo 7y ago
It sure wasn't like this for our parents. The UC system was close to free in the 60s. Portland State University's very first summer session was $50 for tuition and fees. Universities supported simply by taxes, not a byzantine system of public and private loans (still backed by the government, of course), like is common in other Western nations. I'm 100% in on getting the government out of the lending business and back into the "higher ed is a public good" business. I'd rather they just return the actual sticker price to what it was a generation ago, and make it realistic for people to work student jobs to earn the cost of their tuition.

dsfyu404ed 7y ago

Is the regulation you're speaking of regulation that un-does the regulation that provides federal loan to anyone with a pulse who wants to major in journalism (or some other degree for a low paid field) and prevents borrowers from getting rid of said loans in bankruptcy? Make no mistake, we regulated ourselves into this mess. Many people at the time predicted the current situation. More money chasing something drives up the price of that something. It's now pretty clear that we should have funded the schools instead of providing subsidized loans for the students.

jbc1 7y ago

Could you elaborate please?