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For profit colleges accepted anyone regardless of their academic potential. These colleges were simply a conduit of funding to enrich themselves. Public Universities, on the other hand, admit students according to their academic (not financial) potential.
I'm still trying to decide if there will in fact there will be serious ramifications to a student loan bubble burst. Banks and taxpayers will be lefting holding the tab if millions of students default, no doubt, but defaulting on a loan may in fact increase graduates' disposable income by a few percentage points, and thus contribute a little more to the economy. Granted, credit scores will hit rock bottom, and obtaining credit will be nearly impossible for about 7 years, but I have trouble believing that defaulted student loans will hold down the economy in ways similar to the housing default, whereas an underwater/defaulted loan has far reaching effects in many sectors of our economy.
I'll be glad to listen to other opinions on this though.
I believe that, you cannot default on federal student loans. The debt is never forgiven, and you can't declare bankruptcy. Someone factcheck me that
In May 2010 the New York Times reported on the case of Cortney Munna, who graduated from New York University with $100,000 in debt. Of course, the Times could have chosen a great many individuals to profile for such a story; the number of people leaving college with over $40,000 in debt had increased ninefold over the previous decade. Munna and her mother bought into the propaganda: forget about the money you’re spending on college, since the rewards you’ll reap will far surpass them. In fact, she barely scrapes by, working for a photographer. That plus her degree in religious and women’s studies is what her $100,000 investment yielded her.
But perhaps we are being too cynical: what about the extra $1 million that college graduates are supposed to earn over their lifetimes compared to their high-school graduate counterparts? Forbes tackled that one, too. The $1 million figure is arrived at by taking the difference in annual income between college graduates and high school graduates, and multiplying it by the 40 years of the average working life. Where this claim falls short is that it assumes that the additional income earned by college graduates is caused by the college education, when it more likely reflects the fact that smarter, more motivated people are more likely to go to college in the first place.
Meanwhile, the combination of compound interest and low salaries is leaving wreckage everywhere. The four-year cost of undergraduate tuition, room, board, books, and fees at a public university is $46,700, and $99,900 at a private one, even after financial aid and scholarships are included. That also doesn’t include four years’ worth of foregone income – in other words, another $125,000. Bankruptcy won’t save these poor souls: college debt is one category of loans that cannot be written off in bankruptcy proceedings. They’ll follow you forever.
Of course, it is the subsidies themselves that push tuition costs ever higher. Here’s the obvious point everyone pretends not to realize: colleges know the students have access to low-interest loans courtesy of government. Aware that prospective students enjoy artificially increased purchasing power, college administrations raise tuition (and cut back their own aid programs) accordingly. When tuition thus continues to rise, as any fool could predict, we hear huzzahs for the government – for however could students pay this high tuition without government assistance? It is the classic case, as Harry Browne said, of the government breaking your leg, handing you a crutch, and saying, “See? Without me you couldn’t walk.”
This. It's simple supply and demand. Student loan programs also create inefficiencies in the labor markets by encouraging those who shouldn't be in college, to go to college.
While I believe students should be encouraged to do some form of terciary education after high school, that does not and should not necessarily be a university education.
If you want to be an electrician, going to college is a waste, especially that first year when you take all those liberal arts classes.
Liberal arts classes are a waste? Such an education produced intellects like William F. Buckley. The classic curriculum goes back to Plato; the lack of it leaves the populace lazy thinkers, gullible and those unable to articulate their ideas or extrapolate on the ideas of others.
I believe that, you cannot default on federal student loans. The debt is never forgiven, and you can't declare bankruptcy. Someone factcheck me that
True and this why government will be unwilling to end it's debt slave program.
Anyone who thinks our government is about educating society, has fallen prey to it's propaganda.
So what, we are ignoring the fact that private, not-for-profit universities perform better overall than public not-for-profit institutions?
It is the for profit universities that caused the problem.
Quote:
Once students graduate from for-profit colleges, they often find themselves ill-prepared for the job market. "This is because, in many cases, they don’t get the skills they need to compete," The Washington Monthly reports. Though some proprietary schools offer a good education, "it's far easier and less expensive for schools to boost enrollment numbers through aggressive advertising and recruitment than to expend the resources to build quality schools."
I believe that, you cannot default on federal student loans. The debt is never forgiven, and you can't declare bankruptcy. Someone factcheck me that
You're right, you can't shed a student loan. They're literally with you until paid off or you die. Wages can be garnished though. But, 15% maximum wage garnishment is actually alot less than many student loan payments. I've known students who were actually relieved to have wage garnishment. It kept the collection agencies from harrassing them, and they were paying something towards the loan. But other than that, that's about the worst that can happen to a person beyond having a terrible credit history. So with that being said, the increase in disposable income may actually help the economy, which I think is vastly different than the circumstances that surround people with upside down housing loans.
I'm still trying to decide if there will in fact there will be serious ramifications to a student loan bubble burst. Banks and taxpayers will be lefting holding the tab if millions of students default, no doubt, but defaulting on a loan may in fact increase graduates' disposable income by a few percentage points, and thus contribute a little more to the economy. Granted, credit scores will hit rock bottom, and obtaining credit will be nearly impossible for about 7 years, but I have trouble believing that defaulted student loans will hold down the economy in ways similar to the housing default, whereas an underwater/defaulted loan has far reaching effects in many sectors of our economy.
I'll be glad to listen to other opinions on this though.
If students default on their loans, investors who bought student loan securities, etc., go down. It'll be the housing and mortgage bubble burst all over again.
That's why the government made student loan debt non-dischargeable, even in bankruptcy.
If students default on their loans, investors who bought student loan securities, etc., go down. It'll be the housing and mortgage bubble burst all over again.
That's why the government made student loan debt non-dischargeable, even in bankruptcy.
Non-dischargeable doesn't mean that the loan will be repaid. Non-dischargeable just provides a first layer of defense to keep the irresponsible from discharging on a whim, not an insurance policy towards actually getting loan repayment. The absolute most that can be taken from someone who refuses to pay back a student loan is 15% wage garnishment. Banks/investors/taxpayers are left holding the rest of the tab. So what exactly do you feel will happen if the bubble bursts? Who/what in the economy will be affected by massive loan defaults?
I'm not necessarily disagreeing with you. I'm just trying to understand what we can expect if the bubble does burst? I don't really see the parallels with the housing industry.
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