A thread on how to fix the Student Loan crisis.....

[The_Tick]

We have some smart folks here....so how do we fix the current problem, and ease the problem down the road?

All federal loans operate on simple interest, and most private ones do as well. So how do we go about fixing it? I think we can all agree that the cost to attend a university has gotten out of control. But no one is going to roll back tuition rates, because that means that they powers that be at universities would have to lay themselves off or give themselves a massive pay cut. So how do we fix it?

I'd like to see the interest rates lowered. I'd like to see a cap of something like 2%.

I'd like to see a Covid style system where interest does not accrue while a student is still in school. (I'd set a cap on how many years though, because some folks will take 1 class a semester, forever, so that they never accrue interest.)

I'd like to see limits placed on student loans, and some of those limits are set by the going pay rate for the job market that is available for the degree being sought.

I'd like to see favorable types of loans for fields that are needed: STEM, education, mental health professionals. Social Workers....those types of fields.

I'd like to see tiered forgiveness programs based on payment history. (A certain percentage of your loan drops off for every year where you are on time with your payments.)

The biggest change that I would like to see immediately is that students should have to take a 4-6 week class, at the Universities expense, on financial literacy and the impact of student loans and financials in general. This class would be individualized to show the earning power, and likelihood, of landing specific jobs once a student graduates.

What do you all think? What would you do to make it less of a financial burden on students, but still allow folks access to a quality education at a reasonable price? (I loved Soccermom's post about going the JC route. I did that for my AA, and TK2 did as well....simply for financial reasons. TK1 went to BYU because she was on a full SOAR ride.)

[Pelado]

I like a lot of those ideas. In several other developed countries, I believe they have free college options (though I could be very wrong on that). I am not really in favor of free college because I think it's important that the students have skin in the game. The kids I remember seeing at BYU whose parents were funding everything did not seem all that focused on little things like attending class, reading textbooks, or completing homework.

Similarly, I don't think it's a good idea for blanket student debt forgiveness to be any kind of expectation.

That said, college costs have gotten to be a bit ridiculous in many ways.

I really like the idea of a required financial literacy class. I do remember having to do something like that when I was taking out student loans, but it was only like one or two meetings of no more than an hour each. I'd actually like to see that implemented as part of high school curriculums nationwide. I think my high school district required an economics class, but its coverage of personal financial literacy was tangential at best.

[Bo Diddley]

A couple of things I've thought about are increasing funding for Pell Grants and limiting student loans to the instate tuition rate. I also like matching up the loan limits to the industry of your degree. What if someone wants to become a airline pilot, for example? The instate tuition rate probably doesn't match up well here.

If you build in a lower interest rate than the annual rate of inflation, you're spending money subsidizing the loans. I'd prefer to spend the money on the grants.

[Jeff Lebowski]

We have some smart folks here....so how do we fix the current problem, and ease the problem down the road?

All federal loans operate on simple interest, and most private ones do as well. So how do we go about fixing it? I think we can all agree that the cost to attend a university has gotten out of control. But no one is going to roll back tuition rates, because that means that they powers that be at universities would have to lay themselves off or give themselves a massive pay cut. So how do we fix it?

I disagree with your opening premise. Tuition has gone up and administrations have bloated because the system was flooded with federal loan money that suddenly became much easier to access. You scale that back and the supply of students/tuition will go down and the market will adjust. Supply and demand.

I'd like to see the interest rates lowered. I'd like to see a cap of something like 2%.

I'd like to see a Covid style system where interest does not accrue while a student is still in school. (I'd set a cap on how many years though, because some folks will take 1 class a semester, forever, so that they never accrue interest.)

Both of these would make the problems worse. See above.

I'd like to see limits placed on student loans, and some of those limits are set by the going pay rate for the job market that is available for the degree being sought.

I'd like to see favorable types of loans for fields that are needed: STEM, education, mental health professionals. Social Workers....those types of fields.

This one I agree with.

I'd like to see tiered forgiveness programs based on payment history. (A certain percentage of your loan drops off for every year where you are on time with your payments.)

Again, handouts like this won't fix the fundament problem.

IThe biggest change that I would like to see immediately is that students should have to take a 4-6 week class, at the Universities expense, on financial literacy and the impact of student loans and financials in general. This class would be individualized to show the earning power, and likelihood, of landing specific jobs once a student graduates.

Utah requires this kind of course in HS. Not sure how much good it is doing.

[The_Tick]

I disagree with your opening premise. Tuition has gone up and administrations have bloated because the system was flooded with federal loan money that suddenly became much easier to access. You scale that back and the supply of students/tuition will go down and the market will adjust. Supply and demand.



Both of these would make the problems worse. See above.



This one I agree with.



Again, handouts like this won't fix the fundament problem.



Utah requires this kind of course in HS. Not sure how much good it is doing.

What changes would you make?

I agree that bloat is a problem. I agree that loans are too easy to get and too much money is thrown around. How do we fix that?

Those that are in charge are never going to make recommendations that slit their own throat. That doesn't happen. So who makes it happen? Could a state government come in and set a cap on tuition rates?

[Jeff Lebowski]

What changes would you make?

I agree that bloat is a problem. I agree that loans are too easy to get and too much money is thrown around. How do we fix that?

Those that are in charge are never going to make recommendations that slit their own throat. That doesn't happen. So who makes it happen? Could a state government come in and set a cap on tuition rates?

Some interesting ideas and insights here:

https://news.uchicago.edu/story/rese...t-debt-problem

[falafel]

I disagree with your opening premise.

I thought for sure you were going to take issue with this premise:

We have some smart folks here....

[Pelado]

I thought for sure you were going to take issue with this premise:

We have some smart folks asses here....

fifh to be a bit more accurate.

[Pelado]

Some interesting ideas and insights here:

https://news.uchicago.edu/story/rese...t-debt-problem

I didn't realize income-driven repayment had so much debt cancellation potential already:

A fact that is often missed in the policy debate is that we already have a progressive student-loan forgiveness program, and that is income-driven repayment (IDR). IDR plans link payments to income: borrowers typically pay 10–15 percent of their income above 150 percent of the federal poverty line. Depending on the plan, after 20 or 25 years, remaining balances are forgiven. Thus, if borrowers earn below 150 percent of the poverty line, as low-income individuals, they never pay anything, and the debt is forgiven. If borrowers earn low amounts above 150 percent of the poverty line, they make some payments and receive partial forgiveness. If borrowers earn a high income, they fully repay their loan. Put simply, higher-income people pay more and lower-income people pay less.

I liked this:

To fix this, policy makers can also directly align the incentives for schools and borrowers. For example, Brazil, which has had similar problems with its student-loan program, recently gave schools skin in the game by requiring them to pay a fee based on dropout and default rates. This helped align the incentives of the schools and the student borrowers. Making revenues go directly to schools from IDR plans, or implementing income-share agreements in which individuals pay an uncapped portion of their income, could also help align the incentives of schools, students, and taxpayers.

Make the school pay when their students can't/don't. There's a lot to like about that. The only concern I can think of right now - would that reduce the schools' interest in admitting students from tough backgrounds?

[Jeff Lebowski]

I liked this:

Make the school pay when their students can't/don't. There's a lot to like about that. The only concern I can think of right now - would that reduce the schools' interest in admitting students from tough backgrounds?

Yeah, I also thought that was very intriguing.

[Shaka]

Quit loaning money on majors in which one can't garner a marketable skill. If that's too harsh then the amount of student loan should be limited to what the borrower can reasonably pay back in five years based on the average income level for graduates of the major.

Get rid of any major that does not result in a marketable skill. The number of useless programs is staggering.

Get rid of a lot of the GE classes. Several of my GE classes were mere repeats of what I had already learned in high school.

Limit the amount that can be borrowed period. Borrowing 50k+ a year to attend an elite university is stupid unless it's a graduate program. Tuition for undergrad is ridiculous at many universities. Many of these universities have large endowments that could help lower tuition costs.

[Jeff Lebowski]

Limit the amount that can be borrowed period. Borrowing 50k+ a year to attend an elite university is stupid unless it's a graduate program. Tuition for undergrad is ridiculous at many universities. Many of these universities have large endowments that could help lower tuition costs.

Harvard has an endowment big enough that it is crazy that they still charge tuition (ditto for Stanford). However, if you get a law degree there and then go to work in a lower income job (non-profit, public defender, clerking, etc), they will forgive your loan. But if you get a high-paying job you have to pay it back. Not sure if the same deal applies for UG degrees, but it does have some logic.

Keep in mind that tuition is only part of the cost of going to college.

[Shaka]

Keep in mind that tuition is only part of the cost of going to college.

I understand. People should be more grateful for the amounts that BYU (The Church) subsidizes the education of its students. It's really quite remarkable.

[Jeff Lebowski]

I understand. People should be more grateful for the amounts that BYU (The Church) subsidizes the education of its students. It's really quite remarkable.

Well, that too. But I was thinking of room and board, books, transportation, etc.

[Shaka]

Well, that too. But I was thinking of room and board, books, transportation, etc.

I understand those costs as well.