Tuesday, May 10, 2011

Wall Street journal: Student debt at record high

According to the Wall Street Journal, student debt continues to rise to mammoth proportions.

Unfortunately, the writer of the story has a rather strange view of why this might be good: because it will cause them to try to make more money. Hmmm. Wouldn't that be the case also if each of them simply had that amount of money stolen from them?

Sheeez.

21 comments:

Anonymous said...

You know, I work in the student loan industry, and we're often flogged quite regularly on this issue.

However, is it the cost of the house or the interest rate that makes someone in debt beyond their means?

It would help when wreckless comments are made if they were at least directed at the appropriate parties.

You say the money was "stolen". By who? The lenders? False. The schools? False.

Is tuition too high? Probably. Are rates too high? As a student lender, I can tell you we do not set the rates on FFELP loans, the government does.

Not that that matters anymore since Obama nationalized the student loan industry this year.

Now, should people wanting to teach kindergarten attend Harvard and finance their entire way through school? Who's fault is that? Sounds like economic natural selection to me.

Singring said...

You know, if I were completely nuts I would simply point out that in Germany, where public Universities and Colleges are state funded and virtually free to attend (the conservative government implemented a 750 dollar charge per semester in some states a few years ago, which those evil, scheming socialists are going to remove again this year), we have no problem with student debt and insane tuition fees.

But I'm not nuts, because I have learned that government is always evil and bad for people and everyone should be fighting for themselves to survive. If students can't pay 20,000 dollars a year, that's just 'economic natural selection'.

Martin Cothran said...
This comment has been removed by the author.
Martin Cothran said...

Anonymous,

If you read my comment carefully, I was not saying that "the money was 'stolen'." I was pointing out that IF you make the argument that the WSJ writer did--that these loans are good for them because they will cause them to try to be more productive, THEN you would have to say the same thing about having it stolen from you.

I'm taking the WSJ writer's reasoning to its logical conclusions. But it is his reasoning, not mine.

Thomas said...

"However, is it the cost of the house or the interest rate that makes someone in debt beyond their means?"

This is always the excuse used by those who exploit others. Those who practiced indentured servitude could always point the fact that the slaves chose their slavery. Dealers of meth can always justify destroying others by the fact that they didn't force drug users to take drugs--like student loan companies, they provide a service. Those who produce pornography or run prostitution rings defend themselves from charges of exploiting women by saying that the women chose that line of work.

Whether or not someone chose to be exploited is no defense to charges of exploitation. The form of usury practiced by predatory student lenders is just a modern form of indentured servitude.

Lee said...

> The form of usury practiced by predatory student lenders is just a modern form of indentured servitude.

Should banks quit making student loans?

Singring said...

'Should banks quit making student loans?'

We have student loans in Germany. They cover students from low-income families who can't afford to finance their child's accomodation and basic income during studies (University iteslf is basically free, but you need books, you need an apartment etc.).

Now guess who gives out those loans? The government. These loans are interest free.

In the US, you have insanely high fees and you have the private sector making profits off students who have to stump up these fees. You're basically subsidizing the banking industry while at the same time making higher education less and less available, especially for low income families. It is a recipe for disaster.

Lee said...

> Now guess who gives out those loans? The government. These loans are interest free.

Of course, all that largesse is utterkly without cost. It materializes out of thin air because your good little socialists. Nobody has any costs to pay, and there are no tradeoffs.

Singring said...

'Nobody has any costs to pay, and there are no tradeoffs.'

When did I ever claim that?

I simply believe that having all of society contribute toward free loans for low-income students makes eminent sense because it provides access to education for people who otherwise could not afford it and thereby is good for the entirety of society.

You, on the other hand, seem to think that lining the pockets of private banks by making tuition so expensive that people have to take out loans they will be paying off for years or even decades, all the while making education less and less accessible for low income families, is somehow, magically, going to benefit the entirety of society.

Lee said...

> ...lining the pockets of private banks by making tuition so expensive that people have to take out loans...

Gotta keep one's eye on the ball in any flim-flam game. In socialism, the ball is our money, and the shell is "the people."

The question, as always, is "which people?"

Since the costs of education have to be paid by someone, my vote is for the person who gets the education.

I don't see much sense in subsidizing people who will graduate from college and earn more money, from the taxes provided by those who won't graduate college and thus will earn less money.

I know leftists love to redistribute money, but I always thought it was supposed to go from the rich to the poor, not the other way around.

Singring said...

'I know leftists love to redistribute money, but I always thought it was supposed to go from the rich to the poor, not the other way around.'

First of all, you are putting the cart before the horse. Students who are rich when they go to university will be rich anyway and students who go to university when they are poor are - wait for it - poor. There is no guarantee they will become 'rich' as you are fantasizing - in fact they are taking a huge risk.

The prize question then is: in which country will the poor have a better chance of getting an education and getting a decent job?

In country A, in which a year at university can cost upwards of 25,000 dollars and you have to pay interest on that to boot?

Or in country B, where university is paid for by everyone and you don't have to pay any interest on the money you lend?

Hmmmm, that really is a though one indeed.

Also, I don't at all buy the notion that all university students necessarily make more money after graduating. Nor do I buy the notion that they will necessarily make more money at all.

If you quit school at 16 and get a decent job as a plumber, you will have 14 years - 14 years - of a headstart on someone like me. I have just earned a PhD in Biology and have yet to earn more than 2,000 dollars a month. By comparison, when I was doing a summer job at a local car part factory just after leaving school which required no - and I mean zero - qualifications at all (it was literally a job of pushing a button every five seconds), I made about 3,500 dollars in a month.

P.S.: Despite all the 'redistributing of the wealth' that is supposedly so bad for an economy, the German economy right now has recovered to above the level it had before the recent recession and we are expecting a tax revenue increase of 130 billion Euros, despite having bailed out half of Europe in the meantime.

Bet you won't hear that from Twonhall.com, WorldNetDaily and Fox News et al.

I wonder why?

Lee said...

> Students who are rich when they go to university will be rich anyway and students who go to university when they are poor are - wait for it - poor. There is no guarantee they will become 'rich' as you are fantasizing - in fact they are taking a huge risk.

Well, let's not forget about the middle class. They have kids too. Some of them will go on to college. Some of them won't. The kids who don't will have a head start, 'tis true, but the statistics say that eventually the college-educated kids catch up and earn more money.

So, when the government pays for the education, I see government as just a placeholder for the taxpayer. And many of those taxpayers not only never went to college, but could not necessarily succeed in college. Nothing immoral about that, we all have different gifts. Someone with a good mechanical aptitude can hope someday to earn over $100 K as a master mechanic at a car dealership, or own his own business and the sky's the limit.

But of course not everyone succeeds at that level, and typically they will earn less than someone with a degree. What you're suggesting is that they should be pleased and thrilled to pick up the tab for the kids who went to college. That appears to be the way Europe wants it. I guarantee you, however, that when politicians give encomiums to the virtues of higher education, they leave that part out.

> The prize question then is: in which country will the poor have a better chance of getting an education and getting a decent job?

I think, even now, there are more of the worlds' poor thronging to America than to Europe's array of socialist paradises. So don't tell me. Tell them.

> Also, I don't at all buy the notion that all university students necessarily make more money after graduating. Nor do I buy the notion that they will necessarily make more money at all.

And of course I never said any such thing, but I should be used to having to correct your misstatements of my positions by now.

Most college grads will out-earn most non-college grads over the course of a lifetime. Nobody said anything about "all" college grads "necessarily" making more.

> I have just earned a PhD in Biology and have yet to earn more than 2,000 dollars a month.

All bets are off at the graduate level. Nobody here is arguing that getting a Ph.D. or even a Master's degree is financially rewarding.

> the German economy right now has recovered to above the level it had before the recent recession and we are expecting a tax revenue increase of 130 billion Euros, despite having bailed out half of Europe in the meantime.

As a matter of fact, I just read an article about this in one of my right-wing news sources. The article suggested that Germany's economic policies, at this moment in time, happen to be a bit to the right of the Obama Administration's. One interesting tidbit is that the U.S. corporate tax rate is one of the highest, if not the highest.

Singring said...

'Well, let's not forget about the middle class. '

Are you suggesting that a middle-class family can easily afford to sent three kids to college?

'What you're suggesting is that they should be pleased and thrilled to pick up the tab for the kids who went to college.'

That's exactly what I'm suggesting. The reason is very simple: the more highly educated the population, the greater the benefit to society. One of the major reasons Germany has been clinging on to its manufacturing sector is that we have highly trained workers and engineers etc. This is precisely the economic fear when countris look to the East: They are catching up in education, which will erode our last advantage. Therefore, education is not only good for individuals, it is good for society as a whole and is in everyone's interest.

'I think, even now, there are more of the worlds' poor thronging to America than to Europe's array of socialist paradises.'

Is that so? Let me suggest that if Mexico were on the border of Germany, Mexicans would be 'thronging' into Germany.

'Most college grads will out-earn most non-college grads over the course of a lifetime. '

I agree. But what about those that don't? What about those that do but have to pay back tens of thousands in loans plus interest?

'Nobody here is arguing that getting a Ph.D. or even a Master's degree is financially rewarding.'

...and yet they are the ones who have to caugh up the most to get theri degree! And just one post ago you claimed that subsidizing education is to move money from the poor to the rich? You know, it would be much easier for me to accurately cite your positions if you could make up your mind what they are.

'The article suggested that Germany's economic policies, at this moment in time, happen to be a bit to the right of the Obama Administration's.'

Ahhh...I see. So when we were an economic powerhouse under a socialist/green government and the debate was about healthcare, we were an evil socialist empire, but four years under a Christian Conservative/libertarian government and - whammo! - we turn into a country that is to the 'right of the US'. Your sources truly are amazing.

What the article didn't say - or what you are now intentionally omitting - is that those policies moved to the right from a position that is far to the left of the US to begin with (strong unions, universal healthcare, social welfare programs etc.). So in fact we are still to the left of the US and yet we are raking in the tax dollars.

How is that possible? According to the capitalist economic gurus like Friedman and his successors, countries like Germany, the UK, France, Sweden etc. should all be wallowing in the doldrums of economic decay. Not so. Plus we even have universal healthcare and (relatively) free education. Strange, that.

Lee said...

>> 'What you're suggesting is that they should be pleased and thrilled to pick up the tab for the kids who went to college.'

> That's exactly what I'm suggesting.

Nice theory. Prove it.

> Is that so? Let me suggest that if Mexico were on the border of Germany, Mexicans would be 'thronging' into Germany.

Go ahead and suggest. But on a daily basis, I run into Mexicans. Also: Filipinos, Italians, Chinese, Japanese, Greeks, Indians, Koreans, Israelis, English, Arabs, you name it. Even Germans. My boss is an Italian. His boss is a Cypriot Greek, first generation. His boss is an Indian, first generation. I'm sure Germany is doing quite well in that regard, so well that it will be unrecognizable as Germany in thirty years as it becomes Germanistan. But they have some catching up to do, given that not so long ago it was one of the countries everyone was fleeing from. We are the original melting pot and will continue to be for as long as the capitalistic dream is alive.

> Your sources truly are amazing.

They need to be. I'm the only one required in these discussions to present any actual evidence. You, on the other hand, are free to "suggest" and theorize.

Singring said...

'Nice theory. Prove it.'

Well, seeing as we're not experiencing a mass-exodus of rich or middle class people from Germany protesting free education, I would say that rather nicely proves my point.

'We are the original melting pot and will continue to be for as long as the capitalistic dream is alive.'

That's great. But the operative term is 'as long as'. Having humungous debt in Communist China does not exactly speak to the 'capitalistic dream', does it?

'They need to be. I'm the only one required in these discussions to present any actual evidence.'

Wait - evidence?

You mention some article you vaguely remember reading somewhere and that constitutes 'evidence'?

Cite the article and we'll talk.

You want data?

Look at this chart for tax rates around the world in 2005:

http://en.wikipedia.org/wiki/File:Income_Taxes_By_Country.svg

Not only does it show that corporate taxes in Germany are on teh same level as in the US (as you have claimed otherwise), it also shows that personal income taxes are almost twice as high in in Germany as they are in the US.

And yet...we still have billionaires happily living here, we have a strong industry that has recovered faster than in most other countries, we have universal healthcare and free education.

Lee said...

> Well, seeing as we're not experiencing a mass-exodus of rich or middle class people from Germany protesting free education, I would say that rather nicely proves my point.

You suggested that people who don't go to college are better off when forced to subsidize the incomes of others who will go on to make more money during their lifetimes. And as proof, you mumble something about German emigration patterns and then do your victory lap.

Your standards for proof vary substantially depending on whose argument is being discussed.

> That's great. But the operative term is 'as long as'. Having humungous debt in Communist China does not exactly speak to the 'capitalistic dream', does it?

No, it certainly doesn't.

Singring said...

'And as proof, you mumble something about German emigration patterns and then do your victory lap.'

No, that was my argument to support that Germans are not too upset about having to pay taxes to finance education.

My argument for education of the unedcuated benefiting society is the correlation between education and prosperity, as you can see even within the US: The lower the education level, the worse off the state. That doesn't mean that there is a causal relationship, but it certainly supports the notion.

Or are you honestly going to argue that a system in which the poor stay stupid and the rich get smart is better for everyone?

Lee said...

> That doesn't mean that there is a causal relationship, but it certainly supports the notion.

Thank you. Agreed. It doesn't mean there is a causal relationship, and it certainly is a notion.

In fact, it's equally plausible that cause and effect are being confused -- that the prosperity caused the spending on higher education, not the other way around.

But my point wasn't that higher education yielded no benefits, only going so far as to say that those receiving the benefits should get the bill. The fellow working at the lumber mill and living in the trailer park with a wife and two kids is being taxed in order to provide a benefit to the other fellow who will parlay that into a CPA license and earn$200 K. You say it's worth it to him. I bet he doesn't think so.

But if it's actually true, why, look at all the possibilities. If subsidizing rich people's choices makes poor people better off, there are lots of other areas we could explore. I bet there is a correlation between yacht clubs and properity. Let's subsidize yacht clubs. The states where there are more Niemann Marcus stores are probably better off than the states where there are more Wal-Marts. Let's subsidize Niemann Marcus. I'm not saying correlation is causality, but it certainly supports the notion.

Singring said...

'In fact, it's equally plausible that cause and effect are being confused -- that the prosperity caused the spending on higher education, not the other way around.'

That is certainly possible, but are you now trying to suggest that the US is spending even more on higher education that Germany, wven though it charges high tuition and doesn't provide free student loans???

You're spinning in circles so fast its making me dizzy.

'But my point wasn't that higher education yielded no benefits, only going so far as to say that those receiving the benefits should get the bill. '

But that is exactly the case if you pay for education via taxes. Everyone benefits, so everyone pays - and it snot as if higher education automatically makes you rich, as you yourself admitted.

'The fellow working at the lumber mill and living in the trailer park with a wife and two kids is being taxed in order to provide a benefit to the other fellow who will parlay that into a CPA license and earn$200 K.'

You seem to forget that the guy making 200K a year also pays taxes - in a progressive system he pays a greater percentage of his income than the guy working at the mill - and if socialists have their way, a much greater percentage.

Don't omit whichever facts you find inconvenient when coming up with scenarios. Nobody is arguing that the poor should be paying for the education of rich and the rich will pay nothing. No - the rich will have to stump up a lot of taxes - but they will do so when they are actually rich. You would rather drag young people down with piles of debt just because they might get rich. That's even worse than the caricature of socialism you espouse.

'You going to university? You might get rich, kid, so let's see you pay 20,000 a year up front!'

'If subsidizing rich people's choices makes poor people better off...'

How am I subsidizing rich people when

a) they have to pay more taxes

and

b) they have no access to free student loans (as is the case in Germany)?

It is you who is subsidizing rich bankers by driving thousands of students into theri arms each years who have to pay interesty on their loans. That means they have to pay private corporations for the permission to study.

Lee said...

> That is certainly possible, but are you now trying to suggest that the US is spending even more on higher education that Germany, wven though it charges high tuition and doesn't provide free student loans???

I neither suggested it, nor tried to suggest it, nor thought it.

> Everyone benefits...

> Don't omit whichever facts you find inconvenient when coming up with scenarios.

It's a bit late in the day to be concerned about facts. You have already based your argument on a "correlation" that "supports the notion" you are putting forth.

Singring said...

'You have already based your argument on a "correlation" that "supports the notion" you are putting forth.'

So let me ask you:

Do you believe that providing tax-paid eductaion and access to education for low-income people does nothing to benefit society as a whole?