Colleges are full of it: Behind the three-decade scheme to raise tuition

Re:Colleges are full of it: Behind the three-decade scheme t... by aliston on Sunday June 08, 2014 @03:47PM (#7865654)

I'm not sure what you mean by "throw up" but my prediction is that a large portion of these education loans will end up being forgiven. It's housing bubble 2.0 and there's just no other way around it -- millennials leveraged up after being told for years that college was the path to prosperity and simply haven't seen the prosperity. The default rate on student loans is way up because, by and large, we're not making as much money, are less likely to have a job, aren't forming households and have massive debt/income ratios in comparison to our parents generation. If the government doesn't bail us out, the pyramid scheme implodes.

Of course, it's a terrible message to send and creates a moral hazard, but that's the way the game has been played for the last 30+ years. Your best bet to make it in America is to leverage yourself to the hilt. If you succeed, the benefits are privatized and you can sail off into the sunset. If you fail, the losses are eaten by the public.

In 2007 it was the bankers, mortgage lenders, GSEs and insurance companies working together to line each others pockets. This time around its the same deal, with (in order), the bankers, student loan originators (i.e. the government), Sallie Mae and the universities. Why would things play out any differently this time around?

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Re:Colleges are full of it: Behind the three-decade scheme t... by carsongross on Sunday June 08, 2014 @03:52PM (#7865668)

It's easy to say that "they will be forgiven" but that's a huge evaporation of debt in the system: these are assets being marked at par in pension funds, etc.

Students are poor and don't vote. That's why it will be different this time.

EDIT: (I really should take more time in my replies) Also, let me say that I am in 100% agreement with you about the morality of the situation and how GenY (and GenX) were sold a bill of goods on the debt issue. But I think we are at the end of the line (in the next decade or so) and now it's a matter of who takes the most pain. I wouldn't bet on that being the banks, insurers or pension funds, and evidence so far confirms my non-bet.

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Re:Colleges are full of it: Behind the three-decade scheme t... by aliston on Wednesday June 11, 2014 @06:38PM (#7880853)

I wouldn't either. It will be the government, just as it was last time. Here ya go:

http://www.politico.com/story/2014/06/student-loan-repayment...

Capped payments and all debt forgiven after 20 years.

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Re:Colleges are full of it: Behind the three-decade scheme t... by bogger on Sunday June 08, 2014 @04:18PM (#7865751)

> Your best bet to make it in America is to leverage yourself to the hilt. If you succeed, the benefits are privatized and you can sail off into the sunset. If you fail, the losses are eaten by the public.

I couldn't agree more but I would say that it applies not just in America, but in many other countries too. We are seeing it across the western world at the moment, where, because of low central bank interest rates, the virtuous savers are being burnt alive to repair the balance sheets of the wicked banks.

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Re:Colleges are full of it: Behind the three-decade scheme t... by Detrus on Sunday June 08, 2014 @05:17PM (#7865934)

Why would the pyramid scheme implode? Does the college loan industry pose a systemic risk like the banks did? If students fail to become middle class from being forced to pay off debts for stupid crap, someone is still getting paid.

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