It is never too late for education. It is always too early for crippling debt that exceeds your proven earning potential. None of this advice touches on the lost principle of not putting one's future on layaway. Student load debt forgiveness is a death sentence for American politicians yet there are millions of us waiting for a miracle.
This is an important comment and having worked extensively in this space, I would like to expound on it.
The "best" college educations typically take 4 to 10 years to reach a break even point. Some degrees can result in a net loss of lifetime income.
The older you get, typically the less monetary sense a degree makes. Couple this with an open admissions degree from a for profit college and you are likely on thin ice.
If you (as a returning adult) want to continue your education, that is great. Just make sure you are doing it for the right reasons.
I don’t mean to be contentious here, but the reason for which student debt cannot be discharged by bankruptcy is pretty sound: it’s because education (theoretically) adds warning power to an individual and cannot be liquidated.
more to the point: it's an unsecured (ie, there's no collateral to take in the event of default) loan with a very low interest rate issued to a group of people who have little to no credit history.
The debt I've seen my peers saddled with has typically been 6-10%, issued mostly in the recession/post-recession years of low interest rates. It seems like exceedingly high interest to me when mortgages and car loans are half as much.
mortgages and auto loans are secured with assets. the lender can take back the car or house if you default, greatly limiting the risk of lending.
a better comparison for an unsecured loan would be a credit card. please let me know if you find a credit card with anything near a 10% interest rate. afaik, the best rates are around 14% and only go to people with very good credit.
I think student debt is the safest of all. It can't be discharged in bankruptcy anymore. Further, it's typically guaranteed by the government on top of that. Credit cards are a poor comparison I think.
it's important not to conflate federal loans with private loans. neither can be discharged during bankruptcy, but only federal loans are guaranteed by the government. also, the government sets the interest rates on federal loans.
a private student loan is not a particularly safe debt to issue. even though the loan cannot be discharged, there is still a substantial risk that the borrower will never be able to pay it back. credit cards and personal loans are a pretty good comparison IMO, as the main difference is the fact that student loans cannot be discharged. this is in fact priced in already; even private student loans have much lower interest rates than any other kind of unsecured loan.
The majority of my loans (about 70k of 80k total) had interest rates above 6%, some were over 8%, and my wife's are about 13%. Considering how low the risk to the lender (in that they can't be discharged in bankruptcy) I would say the interest rates are borderline exorbitant.
the fact that you can't discharge these loans is certainly beneficial to the lender, but it doesn't solve the "blood from a stone" issue.
if you can't make your mortgage payments, eventually the bank sells your house and gets most of the principal back. the interest only has to cover the administrative cost of selling a few houses (possibly at a loss) and then it's all profit.
a certain fraction of people taking on student loans today will never make enough money to pay them off. now the interest has to be enough to actually cover the risk of the lender losing all that money.
even 13% is pretty good for an unsecured loan. according to nerdwallet's loan calculator, this is basically as good as it gets for unsecured personal loans in general. [0]
So many young people today think that this is how it always was, and don't realize that it's nonsense. Originally meant to decrease the deficit or whatnot, but having the opposite effect of raising the deficit as the US has become more uneducated and susceptible to ignorance.
Unfortunately a lot of other draconian legislation was passed at that time - see the DMCA, etc. Now that the truth is coming out though, there's hope that some of this can get reversed after 2020 if enough people learn about the true history of controversial issues like these.
Can you explain why that is to me? I would think that if the expected return on college loans drops significantly, fewer large loans would be given out that can be passed on to universities which would see less demand for their product and would need to lower their prices accordingly.
The universities aren't on the hook for student loan defaults so they don't care about the expected return for the borrower or the lender. If students borrowed from the schools directly, then the admissions process along with university spending patterns would be vastly different. The only thing we have that is remotely close to this is schools giving out scholarships to students who have great potential to be high earners who later donate back to the school.
A startup called Lambda started teaching (online) for free in exchange for a percentage of the new graduate's salary. This is called Income Sharing Agreements (ISA).
There are plenty of mechanisms to counter this. One is direct funding of colleges as we did before via state and Federal funding. Another is to establish a feedback loop where loan guarantees and funding for the institution are a function of their students default rate: that way if the education doesn't lead to jobs then the school gets less money.
That will lead to universities only accepting students that would get jobs after graduation, which would probably kill many majors that don’t have high employment rates.
Not really; most university graduates can find jobs relatively easily. Unemployment among young diploma-holders in the US is very low, and the diploma premium to income is high, though of course varies by the major. What will rather happen is that less-well-paying majors will become cheaper.
We don't need millions of people learning unproductive things for excessive prices.
Obvious people who can afford to learn something for fun can do so, and knowledge that is socially valuable but not economically valuable can be supported by government or private patrons who see the social merit. Both are better than duping kids into huge loans.
Unfortunately it is a matter of voting blue enough, not just blue. In some areas politicians, even Democrats, regularly relate to their constituents by bashing "East cost liberal elites" despite having degrees from Ivy League schools. If Doug Jones had said that a liberal arts education is valuable for developing into a well-rounded citizen his race would have ended then and there.
I have a college degree. I hope for my kids to take the path of earning college degrees. I think that college is great in the abstract. I also think that until we sort out our health care system in this country (USA), a career in the trades is a very frightening prospect.
Even so, this comment is very interesting to me.
I frequently see on Hacker News the sentiment that modern higher education is a bubble. That if we don't actively encourage young people to consider a life in the skilled trades, we should at least be teaching respect for those who do.
But at the same time, it's hard to ignore the open derision toward non-college grads.
I mean, in this particular example, why SHOULD non-college grads support a politician's promises to subsidize colleges, at the expense of other more direct interests? There are obvious cultural/tribal resentments in play, as you're talking about transferring wealth from one class to another class which openly looks down upon the first. But even separating emotion from it, it's hard to criticize strawmen for opposing policy that might well reasonably be seen as voting against their own interests.
Subsidized college is for the rural and urban poor, no the elites. Elites don't wait for subsidies, and low-SES people need more cheap vocational/technical colleges to raise their SES.
I do not have a college degree. I was not speaking about politicians promising to subsidize higher education but I can speak to that anyway. I said that in many parts of the country, even in areas where voters are willing to cast a blue vote, education is viewed as a tool used by the wealthy elite to disqualify the viewpoint of the commoner.
George W. Bush famously spoke of following his "gut" when asked about his decision process concerning foreign policy. In doing so science, research and general means of informed decision-making were dismissed as a way for an elitist to tell laborers that they're too stupid to understand his thought process. The hypocrisy is that he himself went to Yale and Harvard and clearly values higher education; he joined the same secret society at Yale to which his father and grand-father had belonged. This trend has continued to the point that lowly insults are preferred by most voters over policy discussion. This is true of both parties. (e.g. "Pocahontas", "motherfucker")
The reality is that education in and of itself is a societal equalizer. A liberal arts education was developed in the ancient world to equip people with the skills that they needed to live freely as members of a society: logical reasoning, self-expression and the ability to record your thoughts and interpret the thoughts of others. We now speak of education in terms of time commitment and expected pay-off, the massive debt considered an unavoidable nuisance. It is often after a child has selected a college or university that they consider how they will pay (or accrue debt) for it. The elites know that education is a equalizer and that is why they try so hard to frame it as a tool for the enemy of the common people. The last thing that the elites would want is commoners getting wise. When common people do see the value of education they are buried in debt to stifle their upward mobility.
To answer your question, non-college graduates should support the subsidization of higher education because nothing could do more to serve them and their interests. For the time being tough, pursuing an education may mean separating the concept of education from what we have learned to think of as an educational institution. I don't have a college degree and I don't want one (i.e. I don't want to earn one at this time) but I am convinced by the reasoning behind supporting education that has been repeated for thousands of years. In my opinion it is tantamount to supporting the advancement of human civilization and right now we desperately need a renaissance.
