Student loans: Michael Lewis exposes some pretty nasty behavior regarding PSLF

[ajm184]

Tim wrote:

A major in history from State U can qualify you

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A liberal arts education is not something I would pursue, nor does said degree position a person IMO for a particular career with a certain (and low) salary range.  IMO if one believes an undergraduate degree is the end of the line, rather than a springboard for other learning(s), that is where folks with any degrees can get into trouble and in particular where a 'liberal arts' degree does not translate to real world economics/finances.

I have two friends, both with undergraduate history majors, one is a general surgeon and the other is a computer architect selling in-memory cloud solutions to F500 companies.

[Tangler]

Brains428 wrote:

The great thing about managing finances poorly during residency is that you eliminate the possibility of PSLF…

Did anyone listen to the most recent (like yesterday or today’s) Freakonomics podcast about student loan debt. It has the president of Purdue University who is trying to stall the rise of tuition. It also talks about some of the potential solutions (a payback of tuition to the university itself as a percentage of salary based on field entered) and some failed solutions (Rhode Island, Australia).

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Yes. Just listened to the Freakonomics podcast. Interesting: President of Purdue (Mitch Daniels) is frankly amazing. He has frozen Purdue's tuition. Daniels says "No more tuition increases, we had 37 consecutive  tuition increases before I came to Purdue and some of these were not small....we had to stop this." He made spending cuts. He froze tuition at 2012 levels and they have not increased since then.

What has he focused on? No water features, no climbing walls, no concierge features, just outstanding professors and a high professor to student ratio. He almost ran for president in 2016 and I wish he would have. (His wife and kids talked him out of it).

He also has an interesting repayment strategy called an "income share agreement"  or ISA. If I understand it correctly it works like this: People "invest" in students (pay the tuition for a group of students). The students then have an obligation to pay back a percentage of their salary for a certain number of years. For example: Chemical engineer pays X% of their salary for Y years and then they are done. People who invest usually make some money (the average debt is <40k the average salary after graduation is >100k). The program is called "Back a Boiler". They consider it equity rather than debt. If the student does not do well the investor loses, but if the investor does well they make more. There is also a top cap on how much the person has to pay and that is 2.5x the amount borrowed. They pay an affordable percentage of whatever their income is for a certain number of years and then they are free = done. The repayment period is less than 10 years. I like it!

He says it is like working your way through college after college. Also, the student has to make certain grades etc. to qualify. I think it is an interesting option. I don't fully understand it, but the link below has more details and it sounds interesting. Might be an interesting alternative investment! Wish you could pick which students to invest in! I imagine from this discussion, that every person here would love to invest only in liberal arts majors (JK).

 

Here are some links:

https://purdue.edu/backaboiler/overview/index.html

https://www.purdue.edu/president/about/biography.php

https://podcasts.apple.com/us/podcast/freakonomics-radio/id354668519?i=1000437577524

[Lordosis]

Those changes sound great to you, me and people looking to get a good education and a good price.  However I wonder without the bells and whistles will it hurt their admissions?   The typical high schooler wants climbing walls, Student life activities, and concierge features.  Not sure if ditching the water features will hurt.  To the student either mom and dad are paying or they are taking out monopoly money loans so they do not care too much about the cost.  It is just another thing on the list of comparisons.  Why do you think college "fit" is pushed so much.  You cannot assign a price tag to fit.

I agree with what you are saying and the changes listed in your post but I am skeptical that they will work unless it becomes a trend across the majority of colleges.

[Tangler]

Lordosis wrote:

Those changes sound great to you, me and people looking to get a good education and a good price.  However I wonder without the bells and whistles will it hurt their admissions?   The typical high schooler wants climbing walls, Student life activities, and concierge features.  Not sure if ditching the water features will hurt.  To the student either mom and dad are paying or they are taking out monopoly money loans so they do not care too much about the cost.  It is just another thing on the list of comparisons.  Why do you think college “fit” is pushed so much.  You cannot assign a price tag to fit.

I agree with what you are saying and the changes listed in your post but I am skeptical that they will work unless it becomes a trend across the majority of colleges.

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This is what he was told when he got to Purdue: "YOU CANNOT DO THIS.....WE NEED WATER PARKS, CONCIERGE FEATURES CLIMBING WALLS, ALL THIS OTHER BS TO COMPETE"

Guess what: His enrollment is actually way UP!

MORE kids going there!

I do see your argument. The "FIT" nonsense really is pathetic and ridiculous. It needs to stop. It is NOT good for the student or the tax payer.

I know people who send their kids to private expensive schools for "fit" and wonder why they end up in tons of debt. I feel bad for the kid (they are in a mess) but at the same time I don't want to pay a huge Elizabeth Warren wealth tax to fund water slides and climbing walls.

(Warren wants to forgive everyone's student loans and make tuition free by instituting huge tax increases on the wealthy). Crap, I am becoming one of those: "wealthy" and that does not sound really nice to me now. I might have felt differently when I was just out of training and looking down the barrel of 300k in student loans, but now that I have killed those loans I don't want to pay for everyone else!

At some point I think the cost does matter. At some point we as a nation need to put a stop to the water falls and the climbing walls.

People in Indiana can get an amazing education for 20k per year and they can use this ISA thing (No risk, you are not on the hook if it does not work out). I hope that model works and takes off. I would love the federal government to get out of the tuition paying business and for schools to focus more or things that matter rather than opening petting zoos, water slides, and other nonsense.

 

[hightower]

Panscan wrote:

I think people think liberals arts adds a lot more to our culture than it really does.

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Unfortunately I think too many people these days are starting to think this way.  The new American view of education is that it's only purpose is to land you a job and earn you money.  That's a sad, sad view of life.  My liberal arts college years fundamentally changed who I was and helped me see the world in a whole new light that I now cherish dearly.  I wouldn't want to live in a world where people didn't care about the things that I learned about during those years.  I minored in music, just because it's something that makes me happy.  I still smile every time I hear Wagner played on the radio.  I got chills when I visited Neuschwanstein in Germany and saw the art work depicting his operas on the walls that mad Kind Ludwig commissioned after being so inspired by his music.  I took lots of extra biology classes just because I found them interesting and exciting.  This is what introduced me to our National Parks when my ecology class went on a camping trip to the everglades to bird watch and get a glimpse of what Florida looked like before humans dramatically changed it.  Still to this day all of our vacations revolve around traveling to different national parks and experiencing nature in this way.  This sort of curiosity about the world and nature and human behavior and our interactions with it all is what makes life worth living IMO.  Otherwise we're just a bunch of mindless robots on an assembly line waiting for our next paychecks.  Human innovation and discoveries are inspired by and absolutely dependent on creativity.  I absolutely believe that good liberal arts education adds far, far more to society than is able to be measured or quantified.

It's no mistake that so many of the most influential and important people in history had liberal arts educations.

With all that being said, I also believe that people shouldn't be forced to go into hundreds of thousands of dollars of debt to get an education like that.  That's a problem that is the direct result of greed and stupid government policies that shouldn't have been started in the first place.

[hightower]

Tangler wrote:

Brains428 wrote:

The great thing about managing finances poorly during residency is that you eliminate the possibility of PSLF…

Did anyone listen to the most recent (like yesterday or today’s) Freakonomics podcast about student loan debt. It has the president of Purdue University who is trying to stall the rise of tuition. It also talks about some of the potential solutions (a payback of tuition to the university itself as a percentage of salary based on field entered) and some failed solutions (Rhode Island, Australia).

Click to expand…

 

He also has an interesting repayment strategy called an “income share agreement”  or ISA. If I understand it correctly it works like this: People “invest” in students (pay the tuition for a group of students). The students then have an obligation to pay back a percentage of their salary for a certain number of years. For example: Chemical engineer pays X% of their salary for Y years and then they are done. People who invest usually make some money (the average debt is <40k the average salary after graduation is >100k). The program is called “Back a Boiler”. They consider it equity rather than debt. If the student does not do well the investor loses, but if the investor does well they make more. There is also a top cap on how much the person has to pay and that is 2.5x the amount borrowed. They pay an affordable percentage of whatever their income is for a certain number of years and then they are free = done. The repayment period is less than 10 years. I like it!

He says it is like working your way through college after college. Also, the student has to make certain grades etc. to qualify. I think it is an interesting option. I don’t fully understand it, but the link below has more details and it sounds interesting. Might be an interesting alternative investment! Wish you could pick which students to invest in! I imagine from this discussion, that every person here would love to invest only in liberal arts majors (JK).

Click to expand...

The income share agreement is not uniquely his idea.  Lot's of colleges are starting to offer those.  Even worse than student loans in my opinion. Think about the potential impacts that kind of thing could have on your future earning potential and what you'll actually end up paying for your education.  The percentage of your income will be fixed regardless of how much you make.  So, what's the incentive to work hard and get that raise if it will just mean you're paying more for your college?  Will that inspire young graduates to just take entry level positions for 10+ years in an effort to avoid over paying for their schools?  Imagine how you'd feel if you were stuck with an ISA and decided you wanted to retire early but couldn't because you still had so many years left to pay.  And you can't refinance your ISA or pay it off early like you can a student loan to avoid long term interest costs.  It's like you're being forced to pay interest on your student loans for the entire term!   It's a whole new type of forced labor in my opinion.  Bad deal for everyone except the schools.

Dave Ramsey has already been commenting on these: https://www.daveramsey.com/blog/income-share-agreements

[ENT Doc]

Lordosis wrote:

Those changes sound great to you, me and people looking to get a good education and a good price.  However I wonder without the bells and whistles will it hurt their admissions?   The typical high schooler wants climbing walls, Student life activities, and concierge features.  Not sure if ditching the water features will hurt.  To the student either mom and dad are paying or they are taking out monopoly money loans so they do not care too much about the cost.  It is just another thing on the list of comparisons.  Why do you think college “fit” is pushed so much.  You cannot assign a price tag to fit.

I agree with what you are saying and the changes listed in your post but I am skeptical that they will work unless it becomes a trend across the majority of colleges.

Click to expand...

This argument would hold if the US education system managed to discover itself as the only Giffen good in history.

[ENT Doc]

hightower wrote:

Tangler wrote:

Brains428 wrote:

The great thing about managing finances poorly during residency is that you eliminate the possibility of PSLF…

Did anyone listen to the most recent (like yesterday or today’s) Freakonomics podcast about student loan debt. It has the president of Purdue University who is trying to stall the rise of tuition. It also talks about some of the potential solutions (a payback of tuition to the university itself as a percentage of salary based on field entered) and some failed solutions (Rhode Island, Australia).

Click to expand…

 

He also has an interesting repayment strategy called an “income share agreement”  or ISA. If I understand it correctly it works like this: People “invest” in students (pay the tuition for a group of students). The students then have an obligation to pay back a percentage of their salary for a certain number of years. For example: Chemical engineer pays X% of their salary for Y years and then they are done. People who invest usually make some money (the average debt is <40k the average salary after graduation is >100k). The program is called “Back a Boiler”. They consider it equity rather than debt. If the student does not do well the investor loses, but if the investor does well they make more. There is also a top cap on how much the person has to pay and that is 2.5x the amount borrowed. They pay an affordable percentage of whatever their income is for a certain number of years and then they are free = done. The repayment period is less than 10 years. I like it!

He says it is like working your way through college after college. Also, the student has to make certain grades etc. to qualify. I think it is an interesting option. I don’t fully understand it, but the link below has more details and it sounds interesting. Might be an interesting alternative investment! Wish you could pick which students to invest in! I imagine from this discussion, that every person here would love to invest only in liberal arts majors (JK).

Click to expand…

The income share agreement is not uniquely his idea.  Lot’s of colleges are starting to offer those.  Even worse than student loans in my opinion. Think about the potential impacts that kind of thing could have on your future earning potential and what you’ll actually end up paying for your education.  The percentage of your income will be fixed regardless of how much you make.  So, what’s the incentive to work hard and get that raise if it will just mean you’re paying more for your college?  Will that inspire young graduates to just take entry level positions for 10+ years in an effort to avoid over paying for their schools?  Imagine how you’d feel if you were stuck with an ISA and decided you wanted to retire early but couldn’t because you still had so many years left to pay.  And you can’t refinance your ISA or pay it off early like you can a student loan to avoid long term interest costs.  It’s like you’re being forced to pay interest on your student loans for the entire term!   It’s a whole new type of forced labor in my opinion.  Bad deal for everyone except the schools.

Dave Ramsey has already been commenting on these: https://www.daveramsey.com/blog/income-share-agreements

Click to expand...

How is it worse than the current situation exactly?  Under ISAs the risk burden is shifted to the two entities involved in the transaction - the school, and the student.  The current situation shifts risk completely away from the school (who gets their money up front regardless of quality) and puts it on the student and increasingly the taxpayer.  This is inappropriate on several levels.  At the extreme, if ISAs were universal and complete schools would be forced to keep costs down and compete on quality (= value to students).  You mention a lot of sacrifices that kids might make under an ISA.  What exactly do you think the incentive is under IBRs and our current system?  I don't know how you can say the current system is better from any objective standard or by the incentives that are created.

[Tim]

The value of LifeLong Learning is underestimated. However, As Mark Twain said, “I have never let my schooling interfere with my education.” Fortunately the process doesn’t require enrollment, tuition, room and board. Many options exist for free online courses and the “old fashioned” thing called a library card. Taking degree requirements will not educate a student for a lifetime. That is a personal choice. Music appreciation and camping require interest, not a loan that is difficult to repay.

http://mer-cury.com/quotes/10-education-quotes-to-inspire-lifelong-learning/

[Lordosis]

Having educated masses is important for society but we get to the point of diminishing returns.  We get a liberal arts education in middle and high school.  If you want or need more then that for hobby or employment you need to pay for it.  Is this right?  I do not know how much history, philosophy, and art the general person needs to know.

[Panscan]

It's not the only purpose of education but if you get a degree in basket weaving to enrich yourself for 200k and then Starbucks is the only place that will hire you, you don't get to complain you got screwed. People can do whatever liberals arts they want to do, just understand the job opportunities and costs associated with whatever you pursue.

We have an overabundance of people trying to enrich themselves and a lack of people just trying to find good jobs. Get a solid job and you can spend as much of your free time on bettering yourself as you want. Still have to pay to keep the lights on at the end of the day.

I also cringe how people think a non-liberal arts based life is unfulfilling or lacks purpose. It's interesting how the people who claim to be tolerant and open to change or whatever are actually the least tolerant and have the narrowest view of life or how different people could find fulfillment or meaning.

[Lordosis]

My life is too busy right now to take on any more but I think I would find enjoyment auditing a class or two at the local college to expand my education.  Someday.

[hightower]

ENT Doc wrote:

hightower wrote:

Tangler wrote:

Brains428 wrote:

The great thing about managing finances poorly during residency is that you eliminate the possibility of PSLF…

Did anyone listen to the most recent (like yesterday or today’s) Freakonomics podcast about student loan debt. It has the president of Purdue University who is trying to stall the rise of tuition. It also talks about some of the potential solutions (a payback of tuition to the university itself as a percentage of salary based on field entered) and some failed solutions (Rhode Island, Australia).

Click to expand…

 

He also has an interesting repayment strategy called an “income share agreement”  or ISA. If I understand it correctly it works like this: People “invest” in students (pay the tuition for a group of students). The students then have an obligation to pay back a percentage of their salary for a certain number of years. For example: Chemical engineer pays X% of their salary for Y years and then they are done. People who invest usually make some money (the average debt is <40k the average salary after graduation is >100k). The program is called “Back a Boiler”. They consider it equity rather than debt. If the student does not do well the investor loses, but if the investor does well they make more. There is also a top cap on how much the person has to pay and that is 2.5x the amount borrowed. They pay an affordable percentage of whatever their income is for a certain number of years and then they are free = done. The repayment period is less than 10 years. I like it!

He says it is like working your way through college after college. Also, the student has to make certain grades etc. to qualify. I think it is an interesting option. I don’t fully understand it, but the link below has more details and it sounds interesting. Might be an interesting alternative investment! Wish you could pick which students to invest in! I imagine from this discussion, that every person here would love to invest only in liberal arts majors (JK).

Click to expand…

The income share agreement is not uniquely his idea.  Lot’s of colleges are starting to offer those.  Even worse than student loans in my opinion. Think about the potential impacts that kind of thing could have on your future earning potential and what you’ll actually end up paying for your education.  The percentage of your income will be fixed regardless of how much you make.  So, what’s the incentive to work hard and get that raise if it will just mean you’re paying more for your college?  Will that inspire young graduates to just take entry level positions for 10+ years in an effort to avoid over paying for their schools?  Imagine how you’d feel if you were stuck with an ISA and decided you wanted to retire early but couldn’t because you still had so many years left to pay.  And you can’t refinance your ISA or pay it off early like you can a student loan to avoid long term interest costs.  It’s like you’re being forced to pay interest on your student loans for the entire term!   It’s a whole new type of forced labor in my opinion.  Bad deal for everyone except the schools.

Dave Ramsey has already been commenting on these: https://www.daveramsey.com/blog/income-share-agreements

Click to expand…

How is it worse than the current situation exactly?  Under ISAs the risk burden is shifted to the two entities involved in the transaction – the school, and the student.  The current situation shifts risk completely away from the school (who gets their money up front regardless of quality) and puts it on the student and increasingly the taxpayer.  This is inappropriate on several levels.  At the extreme, if ISAs were universal and complete schools would be forced to keep costs down and compete on quality (= value to students).  You mention a lot of sacrifices that kids might make under an ISA.  What exactly do you think the incentive is under IBRs and our current system?  I don’t know how you can say the current system is better from any objective standard or by the incentives that are created.

Click to expand...

I'm not saying the current system is better, I'm saying that I'd rather graduate owing a fixed amount of money, then owing 10 years of servitude.  I can find creative ways to pay off a big school bill in less than 10 years.  But, how would I be able to pay off a 10 year sentence of my time any faster?  On a personal level, I think it's a worse deal for the student.

I agree the current system is broken.  Too much debt being given out way too freely.

[hightower]

Panscan wrote:

I also cringe how people think a non-liberal arts based life is unfulfilling or lacks purpose. It’s interesting how the people who claim to be tolerant and open to change or whatever are actually the least tolerant and have the narrowest view of life or how different people could find fulfillment or meaning.

Click to expand...

You really have an agenda.  No one is arguing that non-liberal arts education is universally unfulfilling or lacks purpose.  But, for some, it might feel that way and there's nothing wrong with feeling that way.  Who gives you (or anyone else) the right to judge others because they feel that way?  I'm just sticking up for the value of a liberal arts education that seems to be constantly under attack these days.  If you find happiness going to vocational school to learn to be a mechanic, that's great.  Nothing wrong with that.  The point I was trying to make was it would be a real shame if that were the only option out there.  For many, a vocational education wouldn't be the right choice and there's nothing wrong with that either.

You're doing the exact thing you're trying to condemn by generalizing and saying that all liberal arts educated people are intolerant and narrow minded.  That's absurd and, by definition, intolerant and narrow minded to even say that.

[Panscan]

I didn't say all just that it's a common belief. No one is attacking liberal arts I'm just acknowledging that basket weaving doesn't pay the bills and only a fool would complain about not being able to pay the bills after they pursue an expensive liberal arts degree