Sorry for being dense, but how are student loans bad/worse than any other debt? My wife and I had maybe $15k worth of student loans. We paid them off in 7 or 8 years (the interest rates were ridiculously low, iirc) and got the monkey off our backs. It was a choice we made.<p>We could have taken on a lot more debt, but chose to work most of our way through college instead. Graduation took longer, we never went out to eat, and drove a crappy old car. Isn't that what "having no disposable income" is supposed to look like?
Student loans are also related to universities raising their costs substantially. I think it would be very hard to pay full tuition at Stanford, MIT, Harvard, etc without student loans even working full time in college. Part of the blame can be an educational system that has costs spiraling out of control
If the collateral is human capital (not a house or car), why don't they offer loans where you pay back a percentage of your future income, rather than a fixed amount? This seems like it would automatically smooth over the worst of the variance resulting in default.
i seriously doubt we'd see the end of student loans, in the event that you could default on them. the banks would expect cosigners, a credit history, and maybe they'd actually look at whether or not the career options for your field of study could actually support the kind of loans you were taking out. (loaning a kid tens or a hundred thousand dollars so that they can get a degree in english lit in four years is just cruel, even if they can default on it.)<p>maybe kids would have to work for a year or two, to save a bit of money, and build a credit history before they'd be loaned the funds. just as well, imo. most 18-19 year olds aren't ready to be in college, anyways.
The annual payment on my Swedish student loans is calculated from my income (it's 4 or 5%) and when I hit 65, the debt is forgiven. They still accumulate interest though, so it's not until last year, 12 years later (but on grad student/postdoc salary) that I've started paying off even the interest.<p>Apparently the government realized they will be stuck with a huge hit around 2035, because they have since changed the terms of student financing to constitute a larger fraction straight grants, but if you do take out loans, the terms are much more strict.
This guy took an unnecessarily long paragraph to express his central point, but it breaks down pretty simply.<p><i>College student-loan debt has revived the spirit of indenture for a sizable proportion of contemporary Americans. ... Because of its unprecedented and escalating amounts, it is a major constraint ... binding individuals for a significant part of their future work lives. Although it has more varied application, less direct effects, and less severe conditions than colonial indenture did...and it does not bind one to a particular job, student debt permeates everyday experience with concern over the monthly chit and encumbers job and life choices. ... [Lenders subsist] off the desire of those less privileged to gain better opportunities and enforc[e] a control on their future labor. ...the planners of the modern U.S. university system...promoted equal opportunity in order to build America through its best talent. The rising tide of student debt...counteracts the meritocracy. ...the current system of college debt ... leads those less privileged to bind their futures.</i><p>I think you can meaningfully divide student borrowers into two groups. One group consists of those who reasonably estimate a positive ROI on their student loans. For these people, it may be somewhat troubling that you can't discharge the debt, but it seems at least somewhat fair since you can't divest yourself of the education, either. These students have no rational reason to complain: they made a financial investment and rationally expect to profit. In their case, the meritocracy is not only intact, but even helped by their ability to raise an investment.<p>The other group consists of those who can't rationally estimate a positive ROI on their student loans. If you're really serious about wanting that education, it's your call whether to blow tens of thousands of dollars on it and realize you will never repay your investment. You have to know you're impoverishing yourself for the sundry benefits of spending years of your life getting a college degree. Maybe it's still worth it. Maybe it's not. But if it isn't, it's not the lenders who are at fault, it's the cultural expectation to get a college degree, even in a field that doesn't increase your earning power. The lenders may benefit, but so do the universities, which get a glut of Ph.D.'s to string along for cheap adjunct positions and millions in tuition. (<a href="http://chronicle.com/article/The-Big-Lie-About-the-Life-of/63937/" rel="nofollow">http://chronicle.com/article/The-Big-Lie-About-the-Life-of/6...</a>) (This very glut <i>also</i> means that, as an example, the humanities have at least the potential for greater meritocracy, in practice.)<p>Student loans--and for that matter, colonial indentures--are probably a great opportunity for those with the capability to make something either out of an education or out of a trip across the ocean. And they're probably worthwhile for someone who seriously believes their life would be improved by a stint in college or a change of continent, even if it doesn't directly pay off. So I'm reluctant to criticize the system just because it has certain dangers.