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So, I wanted more of the "education" discussion of this topic, not the political one, so try and keep it less about the politics of it (though I realize that's not 100% avoidable).
I went to college from 2000-2004 at a private school. My top choice was BC, but I was waitlisted. I also applied to Drexel, Lehigh, U of Scranton, Penn, Pitt, and I think a few others. I don't think I ever realized it until now, but I didn't apply to a school that was very inexpensive. I didn't even apply to Penn State (mostly because I visited, and thought I would be overwhelmed by the size of the school/party scene). I think I was probably more mature from a 'personal finance' perspective when i was 16/17/18, and my high school had a great guidance counselor. Lehigh ended up giving me more financial aid than Drexel, so that's where I went. I knew what I wanted to major in, and it was a field of study that was in high demand and remained in high demand, but I also tried to take a diverse group of electives in case I ever needed to change course. I don't think a lot of college students know what they want to do, they go just to go. I graduated with a reasonably high amount of student loans, especially compared to the averages even of today (i think we're up to an avg of about $27,000 for students who graduate with debt?). I was about double that.
I was fortunate to have graduated at a period when interest rates were low. After consolidation of my federal loans, and a discount for auto-debit + 48 consecutive on time payments, my federal i-rate is 1.62%, and my private loans are all 3%, save for one loan that's got $4,000 left and is 3.5% (this is the loan any extra payments go to until it's paid off).
I consider myself lucky. I graduated at a good time, with a good field of study. But, I also graduated with a large amount of debt, which everyone seems to think is a huge deal now. I'm a bit tired of reading the horror stories the media likes to bring attention to, while ignoring the numerous stories of students who graduate with $20k, $30k, or even $40k, and manage just fine.
The highest my monthly payment ever was was about $600/month. My wife, a pharmacist, has about $200/month payment (2.875% rate for hers, she graduated with less debt than i did).
I dunno what the answer is. There's no doubt it's a drain on the economy that I'm spending approx $500/month for my wife and I today on student loans. But, there's also no doubt that it's a positive for the economy that my wife and I have the incomes we do, largely because of that investment in college. I don't ever see this analysis - what's the net effect? Sure, we've got $500/month of our income paying off our loans. But what would our income be without having taken on those loans? Surely, way less than our income is today.
I don't know what the answer is, but it seems to be for my wife and I, having these interest rates keeps our loans manageable, yet still makes the lenders a reasonable return on their loan to us. Maybe we charge higher rates for 'riskier' degrees? but then, less people would pursue degrees that pay less, but are quite needed (think, social workers).
So, what do people propose? I like what I saw in the news this week about Tulsa County, OK offering all county residents a free community college 2 year education. I dunno what I'll do when my kids reach college age, but having them take summer courses at a local community college seems to be the least we'll do, to help them get general ed credits out of the way and maybe graduate earlier/cheaper.
Lots of people love to quote the total amount of student loan debt we have today as a nation. Well, more people are going to college. more are going to grad school. So, it's not necessarily a bad thing that our total debt is larger. It may be a bad thing, but again - the journlism on the topic is often lazy and just writes about the person who spent $150,000 on an NYU degree that won't get them a job, and now has massive loans.
So - how do we identify the graduates who truly have student loans they cannot manage and help them? Do we steer them into more needed degrees? How do we reduce interest rates? Student loans can't go into bankruptcy (for the most part), so they are extremely low risk. Why are rates of 6, 7, 8, 9% out there?
What suggestions do we have?
Thanks! i look forward to the discussion - let's try and keep it civil.
Hello! Well, I'd like to propose a counter-question: why do universities/post-secondary education deserve to charge the prices they do for education? There is no regulation, therefore the prices just keep inflating. But to what end? Why? Why shouldn't post-secondary education be free, if not extremely lower than they are now?
It just makes no sense why a student seeking higher education most of the time always exits with debt. We made it seem like the way of life in the US for so long that we think it's now normal. But it's not. In fact, a lot of the countries around the world adopted the model of free post-secondary education: Free education - Wikipedia, the free encyclopedia
But a good reason that tuition is so inflated because a large part of the budget is toward sports and sports teams. The glorification of sports is what is depriving a lot of students of having a decent tuition, in my view.
Students are now assets in the business model, the more students the more money they produce. There is no cap on tuition because they can charge whatever they want and people will continue to flock to these schools. It seems if you were a university starting out you should market on a fair tuition price, one that is affordable for many, and once many people come to your school you maintain the price of tuition. Most Universities are out to get huge, build more, bring more to their campus and ultimately want to rule the education world. If that is the drive, then you get what we have today.
Students are now assets in the business model, the more students the more money they produce. There is no cap on tuition because they can charge whatever they want and people will continue to flock to these schools. It seems if you were a university starting out you should market on a fair tuition price, one that is affordable for many, and once many people come to your school you maintain the price of tuition. Most Universities are out to get huge, build more, bring more to their campus and ultimately want to rule the education world. If that is the drive, then you get what we have today.
You are right on that, but when there are scant few alternatives to paying lower prices compared to the majority of post-secondary schools out there, and with more jobs demanding post-secondary education, there's a problem.
You are right on that, but when there are scant few alternatives to paying lower prices compared to the majority of post-secondary schools out there, and with more jobs demanding post-secondary education, there's a problem.
Scant alternatives? Most kids can go to a community college and transfer to a state college for a pretty low price. It's a pretty basic math problem to figure out how much a college will cost.
So, I wanted more of the "education" discussion of this topic, not the political one, so try and keep it less about the politics of it (though I realize that's not 100% avoidable).
...
So - how do we identify the graduates who truly have student loans they cannot manage and help them? Do we steer them into more needed degrees? How do we reduce interest rates? Student loans can't go into bankruptcy (for the most part), so they are extremely low risk. Why are rates of 6, 7, 8, 9% out there?
Well, the interest rate issue is more or less settled. Last August, Congress passed, and the president signed, H.R. 1911 which permanently ties the interest rates for student loans to the 10 Year Treasury Note rate. This replaces the ineffectual system of periodic expirations and renewals that caused rates to fluctuate between 3.4% and 6.8% and created a lot of uncertainty.
From now on, the interest rate a student will have for a loan taken out in a given year is whatever the 10 Year Treasury Note rate was for the last auction before June 1 of that year, plus 2.05%. That's for undergraduates. Graduate loans are now +3.6% and Parent PLUS loans are +4.6%.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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People have plenty of choices for college, and there is a huge range in the cost. Our major state universities are still at about $10k/year if you live at home and commute by bus, but people still like to go to another state and pay for a private or out-of-state tuition because it's a "fun" school or city. Others feel like they have to go to one of the most prestigious (expensive) schools. Student loans are too easy to get, if the requirements were stiffer, people would try harder in high school to have a better chance at scholarships, or would find less expensive schools. Eventually maybe if the demand was less some of the more expensive colleges would be forced to lower their fees. probably not though, because they would just bring in more foreign students.
There are plenty of schools that give full tuition scholarships for academic merit.
There are also tons of need-based scholarships and the Fafsa.
Graduating with a mountain of debt is just a result of poor planning.
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