I suppose this should get filed under problems with statistics. This Vox article is talking about maps showing student loan balances and delinquencies (which is sourced from the Washington Center for Equitable Growth), and while it may seem that their conclusion is logical, it may not be factual.
They are stating that since the high delinquencies map is practically the inverse of the high loan balances that people with lots of student loans are doing ok while those who are having problems don't have high balances, and that seems to follow but maybe not.
The problem is the way averages work. If one area has lots of college grads with student loans and most of them are doing well, then it would follow that you get low delinquency rates, but also that the loan balances would be higher (high density college grads would imply greater need for higher education to live/work in the area, which would mean more and more expensive education). On the other hand places with lots of college dropouts and with people not generally doing well, are likely to have lower debt and higher delinquencies. BUT without knowing the delinquency rates and the distribution of the loan balances you can't say anything about the relationship.
What you want to see is a plot of delinquency rates at various loan balance ranges, and maybe one showing loan balances vs. income level. This doesn't mean the drawn conclusion is wrong, but just that it shouldn't have been drawn in the first place.
Showing posts with label student loans. Show all posts
Showing posts with label student loans. Show all posts
Wednesday, January 13, 2016
Monday, February 24, 2014
Yes, Student Loan Debt is a Problem [Part the Infinity]
Another article, and another day that nothing is going to be done about this. I still think that a student loan forgiveness by the Fed buying up all the debt and torching it and free college going forward would be the best fix. One quick note that was in there was about mortgage requirements:
especially under new mortgage rules that limit total debt for a would-be borrower to 43 percent of their annual income.
I did not know that. I'll be getting married this year, and apparently we wouldn't qualify for a mortgage after that due primarily to student loans (boo debt!). Good thing I've already got one (hooray debt!?!).
Thursday, November 21, 2013
Student Loans
I still think the Federal Reserve should use its awesome power to buy up all the student loan debt and make it go *poof*. More money for mostly younger people who will tend to spend it, or maybe take the chance to strike out on their own. Right now, it may mean extra presents for the holidays.
Thursday, July 25, 2013
Student Loan Rates: Meh.
Lots of noise about the Senate bill passing (Bipartisan! Helping Students!), but it just mostly is not helpful. There are two somewhat separate student loan problems: current and future. The current problem is with people who have [recently] graduated into a crap economy with a mortgage worth of debt to pay off. These people, who might be helped somewhat with lower interest rates, are not addressed, because--unlike pretty much every other type of debt on the planet--YOU CAN'T REFINANCE STUDENT LOANS. People "lucky" enough to have 2, 3, 4% interest: good for you. Those who have 5, 6, 7% interest: tough shit.
The other problem is the level of the debt (not the interest on it), and low interest rates, if they do anything, will make that worse. If you make the price of money much lower for a specific activity (going to college in this case) then people will over-consume that good, and so the price of college will rise faster than it would otherwise. So lowering student loan rates going forward may actually lead to higher debt levels for future students while doing nothing for current graduates with lots of outstanding debt.
We need low cost or free college education available to everyone, and we need to address the outstanding debt of [recent] graduates. All this fucking around about the student loan rates is more distraction than help. Yes, it may help quite a few current students, but at the expense of future students, and to the detriment of our nation, if education is in fact a driver for economic growth.
The other problem is the level of the debt (not the interest on it), and low interest rates, if they do anything, will make that worse. If you make the price of money much lower for a specific activity (going to college in this case) then people will over-consume that good, and so the price of college will rise faster than it would otherwise. So lowering student loan rates going forward may actually lead to higher debt levels for future students while doing nothing for current graduates with lots of outstanding debt.
We need low cost or free college education available to everyone, and we need to address the outstanding debt of [recent] graduates. All this fucking around about the student loan rates is more distraction than help. Yes, it may help quite a few current students, but at the expense of future students, and to the detriment of our nation, if education is in fact a driver for economic growth.
Monday, June 10, 2013
Studen Loan Interest Rates
There has been a lot of writing lately about the student loan rates about to double, and how bad that is for future grads (it is a non-issue for people already out of school, since their rates are already locked in). As much as the interest rate is a bit of a help the problem, however, is not the rate going up, but that the debt level is increasing so fast.
There are two different problems that student loans create: one is the immediate payment of a large balance means money out of pocket right when recent grads are starting new jobs and would, if debt free, be spending lots of money for new "grown-up" things, like housing and furniture. The other is the long time payoff which means recent grads are not going to have their full income for 10+ years (and it is nearly impossible to forgive any of it).
Lowering the interest rate kind of helps with both things as it means your payment is lower and/or your payoff term is shorter. But lower interest rates also, according to economic theories, lead to larger loan balances, and so in the end would likely change nothing.
Three constraints would help alleviate loan debt: a cap on the percent of total income paid (say 10%), plus a cap on the total time to payoff that wasn't so long as to seem daunting: I like 5 years, but would settle for 10 with complete forgiveness of the balance remaining at that point. The third constraint is for private loans only: they are treated like credit card debt for most legal purposes.
Interest rates for private loans would skyrocket past credit card rates, and they would quickly become almost non-existent. Interest rates would almost be irrelevant, as most recent grads paying at the 10% level for the time limit most often would not pay off their loans entirely.
Pay for it by eliminating the student loan interest rate deduction (well, at least for everyone who could be expected to benefit from the program), as well as the deduction that parents get for contributing to education savings plans (which, I believe, are just another give away to well off families).
Really, I think college should be free for anyone who wants to attend.
As for the other problem of student loan debt outstanding among current graduates? The ability to refinance those at lower rates would be a real boon, and would make a larger difference. It isn't ideal (some form of forgiveness or flat payments would be) but it really would help in a way that it doesn't for future grads.
There are two different problems that student loans create: one is the immediate payment of a large balance means money out of pocket right when recent grads are starting new jobs and would, if debt free, be spending lots of money for new "grown-up" things, like housing and furniture. The other is the long time payoff which means recent grads are not going to have their full income for 10+ years (and it is nearly impossible to forgive any of it).
Lowering the interest rate kind of helps with both things as it means your payment is lower and/or your payoff term is shorter. But lower interest rates also, according to economic theories, lead to larger loan balances, and so in the end would likely change nothing.
Three constraints would help alleviate loan debt: a cap on the percent of total income paid (say 10%), plus a cap on the total time to payoff that wasn't so long as to seem daunting: I like 5 years, but would settle for 10 with complete forgiveness of the balance remaining at that point. The third constraint is for private loans only: they are treated like credit card debt for most legal purposes.
Interest rates for private loans would skyrocket past credit card rates, and they would quickly become almost non-existent. Interest rates would almost be irrelevant, as most recent grads paying at the 10% level for the time limit most often would not pay off their loans entirely.
Pay for it by eliminating the student loan interest rate deduction (well, at least for everyone who could be expected to benefit from the program), as well as the deduction that parents get for contributing to education savings plans (which, I believe, are just another give away to well off families).
Really, I think college should be free for anyone who wants to attend.
As for the other problem of student loan debt outstanding among current graduates? The ability to refinance those at lower rates would be a real boon, and would make a larger difference. It isn't ideal (some form of forgiveness or flat payments would be) but it really would help in a way that it doesn't for future grads.
Tuesday, February 05, 2013
Definitely a Problem
I don't know that the housing bubble is the correct analogy for the student loan clusterfuck, but I suppose it references something people have some sense of scale of.
There are some fixes that would be hugely beneficial: the ability to have student loan debt written off in bankruptcy, no federal backing for private loans, caps on annual loan amounts for federal backed loans (maybe $10k/year for tuition plus some sliding scale for living expenses of up to maybe $15k/year, with most places being limited to $5k or so), probably a few other things.
That doesn't really deal with the problem of existing/outstanding student loan debt. I like the idea of a structured, massive, one-time forgiveness plan. It could be something like the stimulus idea(s) I've put up here before, or just a dramatically enhanced version of the slightly-better-than-it-used-to-be student loan debt changes Obama put through (pay a max of a certain percentage of your income, and all outstanding debt forgiven after, I think, 20 years). Making student loan payments fully deductible rather than just interest (yes, I know, I hate deductions, but it's how we roll)--also maybe raising the income limit at which you can no longer deduct--and lessening the payment forgiveness term to 15 years would be a start, reducing the max payment amount to 10% of income, or at least by a point or two would also be nice.
There are some fixes that would be hugely beneficial: the ability to have student loan debt written off in bankruptcy, no federal backing for private loans, caps on annual loan amounts for federal backed loans (maybe $10k/year for tuition plus some sliding scale for living expenses of up to maybe $15k/year, with most places being limited to $5k or so), probably a few other things.
That doesn't really deal with the problem of existing/outstanding student loan debt. I like the idea of a structured, massive, one-time forgiveness plan. It could be something like the stimulus idea(s) I've put up here before, or just a dramatically enhanced version of the slightly-better-than-it-used-to-be student loan debt changes Obama put through (pay a max of a certain percentage of your income, and all outstanding debt forgiven after, I think, 20 years). Making student loan payments fully deductible rather than just interest (yes, I know, I hate deductions, but it's how we roll)--also maybe raising the income limit at which you can no longer deduct--and lessening the payment forgiveness term to 15 years would be a start, reducing the max payment amount to 10% of income, or at least by a point or two would also be nice.
Friday, July 06, 2012
Debt Problems
Looking at a few blurbs on balance sheet recessions (Mike Konczal has a lit rundown). I think the economics is fine, but the focus is really on one major part: the housing bubble. That is certainly the big problem, and the debt overhang from the bubble deflation is huge, but I think that student loan debt needs to be inserted into this as a complimentary problem for two reasons:
1. Housing debt and student loan debt land on two somewhat overlapping segments of society that do massive amounts of purchasing relative to their income/wealth. Basically young(er) people getting started, but at slightly different stages.
2. Lots of people used home equity to pay off student loans. This was seen as a good thing (and really, it probably was).
In the years from ~2000 - 2007 one of the "smartest" things a new college grad with loads of debt and a shiny new job could do was buy a house, wait a year or so (maybe make some improvements) then pull out the equity through a refi and use it to pay off student loans/the car/credit cards. Suddenly you are left with one bill, much smaller than the combined others, and the interest is all tax deductible. Huge win. Even if the house value falls, this is a pretty good deal.
Imagine a world where we didn't end up in massive debt to go to college...say 30 years ago. Those college grads who used equity to pay off their loans would now have less total debt and would be less likely to be underwater which also makes them less likely to, say, walk away (which, in any non-recourse state is also the smart move).
College grads today could either afford to move out on their own, getting an apartment and furnishing it, or would at least have more money to spend on fun/car/clothes/whatever.
The easy fix would be for the fed to use its magical "make money" power to obliterate student loans and give say $25k to any homeowner. A better fix would be for the fed to buy up all that debt and incentivize both paying it off and spending. This could be through the debit card plan I proposed for student loans earlier but other means could work as well.
1. Housing debt and student loan debt land on two somewhat overlapping segments of society that do massive amounts of purchasing relative to their income/wealth. Basically young(er) people getting started, but at slightly different stages.
2. Lots of people used home equity to pay off student loans. This was seen as a good thing (and really, it probably was).
In the years from ~2000 - 2007 one of the "smartest" things a new college grad with loads of debt and a shiny new job could do was buy a house, wait a year or so (maybe make some improvements) then pull out the equity through a refi and use it to pay off student loans/the car/credit cards. Suddenly you are left with one bill, much smaller than the combined others, and the interest is all tax deductible. Huge win. Even if the house value falls, this is a pretty good deal.
Imagine a world where we didn't end up in massive debt to go to college...say 30 years ago. Those college grads who used equity to pay off their loans would now have less total debt and would be less likely to be underwater which also makes them less likely to, say, walk away (which, in any non-recourse state is also the smart move).
College grads today could either afford to move out on their own, getting an apartment and furnishing it, or would at least have more money to spend on fun/car/clothes/whatever.
The easy fix would be for the fed to use its magical "make money" power to obliterate student loans and give say $25k to any homeowner. A better fix would be for the fed to buy up all that debt and incentivize both paying it off and spending. This could be through the debit card plan I proposed for student loans earlier but other means could work as well.
Tuesday, May 22, 2012
Debt is Hurting the Economy...
...Just not the way Republicans (and Germans) think.
In the US, the economy really sucks if you are un-/under- employed. But there are still a lot of people who have jobs--even good ones--and they could provide a much needed boost if it wasn't for personal debt.
Young people buy lots of things. We are just starting out, and need all sorts of things that we didn't have/couldn't afford in school: houses, cars, furniture, families, pets, vacation. These all cost money, which helps the economy. But now we are saddles with lots of debt--mostly student loan--so instead of getting/doing all these nice things with our new jobs, we are paying off debt. In the 4 years since I started at my job I have paid off roughly $50,000 worth of debt that was accrued in some form or another while at school.
A more detailed breakdown:
~$22k on credit cards, of which about half was medical and moving expenses.
~$28k on student loans
I also paid off my car and some of my house, but I bought both of those since I started work.
Of course it's worse than those numbers. Interest means that closer to $70k was spent on debt reduction over that time frame. That is $70k that couldn't help boost the economy at all. Now if I had been debt free, a decent fraction of that would have ended up in savings/retirement accounts, to be sure, but a pretty good fraction would have gone for/would be going for house projects/rennovations, durable goods like furniture, toys like a road bicycle, probably more clothes/shoes (lots of holes in some of mine), ...
I still have student loans to go, so this is continuing, and I'm just one person.
If we handled education properly in this country, the debt levels would be dramatically lower for young people who have the most spending to do. Managing health care properly would further reduce debt levels, especially for those who can't afford insurance but still manage to get hurt/sick. This is excluding the immense good that could be done by properly handling the banks/housing mess.
Debt is hurting our economy badly, just not federal debt. And more of the latter could fix the former.
In the US, the economy really sucks if you are un-/under- employed. But there are still a lot of people who have jobs--even good ones--and they could provide a much needed boost if it wasn't for personal debt.
Young people buy lots of things. We are just starting out, and need all sorts of things that we didn't have/couldn't afford in school: houses, cars, furniture, families, pets, vacation. These all cost money, which helps the economy. But now we are saddles with lots of debt--mostly student loan--so instead of getting/doing all these nice things with our new jobs, we are paying off debt. In the 4 years since I started at my job I have paid off roughly $50,000 worth of debt that was accrued in some form or another while at school.
A more detailed breakdown:
~$22k on credit cards, of which about half was medical and moving expenses.
~$28k on student loans
I also paid off my car and some of my house, but I bought both of those since I started work.
Of course it's worse than those numbers. Interest means that closer to $70k was spent on debt reduction over that time frame. That is $70k that couldn't help boost the economy at all. Now if I had been debt free, a decent fraction of that would have ended up in savings/retirement accounts, to be sure, but a pretty good fraction would have gone for/would be going for house projects/rennovations, durable goods like furniture, toys like a road bicycle, probably more clothes/shoes (lots of holes in some of mine), ...
I still have student loans to go, so this is continuing, and I'm just one person.
If we handled education properly in this country, the debt levels would be dramatically lower for young people who have the most spending to do. Managing health care properly would further reduce debt levels, especially for those who can't afford insurance but still manage to get hurt/sick. This is excluding the immense good that could be done by properly handling the banks/housing mess.
Debt is hurting our economy badly, just not federal debt. And more of the latter could fix the former.
Friday, March 30, 2012
Just a Broken System
I kind of agree with the headline: "There is no student loan 'crisis'" but we do have a broken [higher] education system. A good system would send people to college for something close to free, and then extract a return on that investment by having higher taxes on their higher resulting salaries (i.e. a more progressive tax scheme). This means the successful grads pay back the gubment (many times over in the case of, say, surgeons), and those that have a harder time of it (like many today) are not saddled with an oppressive--and virtually impossible to get rid of--debt burden.
My student loans were pretty high, though not approaching the $100k level. But I got a very good job as a result of my education (I'm pretty middle of the road among my peers, maybe a bit low of middle compared to other non-academics, but very happy). As such I can certainly afford to pay off my student loans. If my education had been free, however, and my federal income taxes about 6% higher, then the government would have made a sizable profit on my college and grad school attendance.
I know that I've no chance of convincing conservatives of this (facts and logic are evidence of bias to them) but if we wanted to be really fiscally conservative, and run the government--at least in part--like a business then the intelligent behavior would entail free school and higher taxes. Of course it would also entail more infrastructure spending (i.e. investment) and higher taxes, but, again, they aren't actually fiscally conservative, and they don't want a well run government, they only want low taxes for rich people.
Note: Obama is pretty much in the same place as (non-crazy) conservatives on these issues.
My student loans were pretty high, though not approaching the $100k level. But I got a very good job as a result of my education (I'm pretty middle of the road among my peers, maybe a bit low of middle compared to other non-academics, but very happy). As such I can certainly afford to pay off my student loans. If my education had been free, however, and my federal income taxes about 6% higher, then the government would have made a sizable profit on my college and grad school attendance.
I know that I've no chance of convincing conservatives of this (facts and logic are evidence of bias to them) but if we wanted to be really fiscally conservative, and run the government--at least in part--like a business then the intelligent behavior would entail free school and higher taxes. Of course it would also entail more infrastructure spending (i.e. investment) and higher taxes, but, again, they aren't actually fiscally conservative, and they don't want a well run government, they only want low taxes for rich people.
Note: Obama is pretty much in the same place as (non-crazy) conservatives on these issues.
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