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I've heard an interesting idea for college loans kicked around a few times, and I was wondering what you guys thought of it.
Currently, the federal government via Sallie Mae provides loans (up to the total cost of attendance) for students to attend vocational schools, community colleges, universities, or professional schools. The students then pay the government back, with interest, after they finish school and get a job.
Instead of doing this, the government could simply takes a percentage of debtors' income for, say, the first ten years after they graduate. The exact percentage would depend on the amount they borrowed. As I see it, this would have several positive effects:
- It would introduce market forces into universities. Is it really fair or economical for an engineering major to pay the same tuition as a sociology major?
- It transfers risk from the individual borrower to the state, in effect creating a large insurance pool for recent college graduates
- It prevents people from graduating school at age 22 with a 200% (or more) debt-to-income ratio
- It puts the brakes on the ever-increasing rates of college tuition
What do you guys think? Would this idea work? What problems do you foresee?
It would encourage expensive, useless degrees more than it would (relatively) cheap, useful degrees. A 200% debt-to-income ratio coming out of college is an excellent incentive not to go to an Ivy League for a philosophy degree with the government on the hook for the Ivy league tuition.
I don't support government being in the business of student loans, Amtrak, health care, home loans, etc... Every business the government sticks their fingers in loses money.
Hugh_Akston said:My vote would be for government to get out of the marketplace and let the free market (something we haven't had in this country for a very, very long time) handle it.
So they are in the business to lose taxpayer money? Because that is exactly what they are doing when they try to run a business. It is costing me and you when they do.Of course it does. If it didn't lose money, then they could just let the private sector handle it. The government isn't in business to make money.
Why, because the loan companies would discriminate? That seems like a big assumption on your part.That would close off college education to a lot of people and have a very negative impact on our nation's competitiveness.
So they are in the business to lose taxpayer money? Because that is exactly what they are doing when they try to run a business. It is costing me and you when they do.
Hugh_Akston said:Why, because the loan companies would discriminate? That seems like a big assumption on your part.
I think it would be a strong incentive for people to take out the maximum amount of loans
RightinNYC said:and then to "work" at easy jobs with relatively low pay.
RightinNYC said:I know that in that system, I would be far more likely to take the 40 hour/week job that paid $60k instead of the 70 hour/week job that paid 3 times that.
RightinNYC said:I would have also spent as long in college as possible - 10 years of sacrificing 25% of a meager salary would be a small price to pay for dicking around for the best 15 years of my life on the government dime while I got my PhD in Politics/whatever tickled my fancy.
You're comparing apples to bowling balls here. The military (at least the Army and the Navy - the Air Force did not yet exist as flight had yet to be discovered and the Marines are typically covered under "armies" as worded in the Constitution) are covered in the Constitution. I don't see government loans for students, government loans for housing, the government running Amtrak or any other business for that matter anywhere in the Constitution. The founders did not want the federal government to have the power or the leverage over people's lives like it does today.Only if you think of government services as though they were businesses. I mean, the US spends $650 billion on the military each year, but no one says that the military "loses money" because it isn't assumed to be a money-making venture in the first place. Same thing with federal university loans. They aren't "losing" taxpayer money on an ill-conceived business venture, they are "spending" taxpayer money on something that they consider to be in the country's best interest even though they know that they won't get all their money back.
Really? Do you know how many people I know that got a student loan other than from the government? I think your stretching reality just a tad here.It's unlikely that an 18-year-old kid with no collateral is going to be able to get a large loan to attend school if the federal government is not involved.
Keep in mind that the percentage of your income that you'd pay would be tied to the amount of money you borrowed.
Then why go to college in the first place?
I'm not really sure that's an undesirable outcome, from a macroeconomic perspective. If people worked 40 hours instead of 70 hours, there would be less unemployment among recent grads.
Well, that problem could be solved by capping the amount that you could borrow. Or charging you more than 25% of your income if you ran up an exorbitant bill. Or both.
Really? Do you know how many people I know that got a student loan other than from the government? I think your stretching reality just a tad here.
I don't support this. I am a student who receives federal loans and I feel it isn't fair. Especially when it comes to the government taking a percentage of your income away based on your degree and salary. Why shouldn't a sociology or art majors degree be the same cost as a biologist or engineer?
digsbe said:People choose what school they go to and they choose to have a major in a certain field. It isn't our fault that they may choose an area of study that does not pay well.
digsbe said:Essentially you are socializing college debt with the more wealthy graduates paying their share and more for those who do not make as much but chose to major in a field that doesn't have many high paying jobs.
digsbe said:It's fair for a theatre major and a science major to pay the same tuition and pay back the same amount of loans. One must also take into account that not all degrees and majors are earned with equal work and effort.
So we should subsidize investors who make risky investments and lose their money? Should we take the money and profits from wise investors to subsidize others? No. Universities charge tuition rates based on credit hours (and typically full time student status). What if a theatre major decides to take a science class? Should science classes be more expensive? A degree and a major is a personal choice.Because the degrees are not worth the same amount of money, from a return-on-investment perspective.
Then why is it sensible for someone to earn and pay for a worthless degree? An engineering degree and a sociology degree should cost the same at the same school. The difference between Harvard and a community college is the quality of an education and the professors.It's not your fault, but it doesn't make a whole lot of sense to charge them so much for a worthless degree. An engineering degree should cost more than a sociology degree for the same reason that a Harvard degree should cost more than a community college degree: it bestows better opportunities and higher salaries.
They should cost the same. A degree is a degree. We shouldn't overcharge science majors because the kids studying art or philosophy won't be able to make as much with their degrees as scientists. It's a personal choice.As it stands now, the philosophy majors are subsidizing the engineering majors. A philosophy degree is worth far less than the average degree, and an engineering degree is worth far more. Yet they cost the same from any given institution.
My point is that typically science majors work far harder than theatre or art majors. People chose to go into sciences because they pay well. However, the classes and coursework is much harder and requires more study. I know many people at my university who are riding off of mommy and daddy's money and are all art and theatre majors. They aren't in school to get a money earning degree, they are there to study a hobby and wind up costing their parents a lot of money while they work in fast food with a bachelors in art or something. I'm not intending to bash those who chose to major in art or theatre, but why should I as a science major have to pay more in tuition and pay back a disproportional amount of student loan money so someone else can pay less due to the fact that their area of study is academically easier and economically not as profitable? I work really hard to keep a 3.0+ GPA as a molecular biology major. I will be in school for 8 years total because after I get my B.S. in molecular biology I am going to go to pharmacy school. I am going to spend 8 years in university, lots of money in tuition, and many more hours of study and testing required to pass and succeed in the area of sciences. Why should I have to subsidize the theatre major when I work much harder and will have to study for over double the amount of years? People make choices, they chose to attend a school and chose to declare a major.I don't really see how that's relevant from an economic standpoint.
I've heard an interesting idea for college loans kicked around a few times, and I was wondering what you guys thought of it.
Currently, the federal government via Sallie Mae provides loans (up to the total cost of attendance) for students to attend vocational schools, community colleges, universities, or professional schools. The students then pay the government back, with interest, after they finish school and get a job.
Instead of doing this, the government could simply takes a percentage of debtors' income for, say, the first ten years after they graduate. The exact percentage would depend on the amount they borrowed. As I see it, this would have several positive effects:
- It would introduce market forces into universities. Is it really fair or economical for an engineering major to pay the same tuition as a sociology major?
- It transfers risk from the individual borrower to the state, in effect creating a large insurance pool for recent college graduates. This, in turn, could increase the number of people pursuing higher education.
- It prevents people from graduating school at age 22 with a 200% (or more) debt-to-income ratio.
- It puts the brakes on the ever-increasing rates of college tuition.
What do you guys think? Would this idea work? What problems do you foresee?
What happens if upon graduation if that individual can not get a job in the field he studied for?
1. Do we take his check he earns at McDonalds, Walmart or maybe what he earns an electrician for the next ten years and we the tax payers take a loss or do we instead take part of his check for the next 30 or 40 years?
2.Do we limit what degrees to what we think there will be a job market for when person graduates can go for under this program so that if there is no job market for that degree the tax payers are not screwed too much? In other words we do not fork out the cash so someone can go to college in order to get into NASA because we know you have a better chance of winning a lottery than getting a job at NASA?
3.Do we allow people to go for degrees that we know that they can easily pay back even if there was no job market for and had to get a job at McDonalds, electrician or construction worker?
4. Do we force people to move to the only places that are hiring people with those particular degrees so that the tax payers are not screwed?
As I see it, this would have several positive effects:
- It would introduce market forces into universities. Is it really fair or economical for an engineering major to pay the same tuition as a sociology major?
- It transfers risk from the individual borrower to the state, in effect creating a large insurance pool for recent college graduates. This, in turn, could increase the number of people pursuing higher education.
- It prevents people from graduating school at age 22 with a 200% (or more) debt-to-income ratio.
- It puts the brakes on the ever-increasing rates of college tuition.
I've heard an interesting idea for college loans kicked around a few times, and I was wondering what you guys thought of it.
Currently, the federal government via Sallie Mae provides loans (up to the total cost of attendance) for students to attend vocational schools, community colleges, universities, or professional schools. The students then pay the government back, with interest, after they finish school and get a job.
Instead of doing this, the government could simply takes a percentage of debtors' income for, say, the first ten years after they graduate. The exact percentage would depend on the amount they borrowed. As I see it, this would have several positive effects:
- It would introduce market forces into universities. Is it really fair or economical for an engineering major to pay the same tuition as a sociology major?
- It transfers risk from the individual borrower to the state, in effect creating a large insurance pool for recent college graduates. This, in turn, could increase the number of people pursuing higher education.
- It prevents people from graduating school at age 22 with a 200% (or more) debt-to-income ratio.
- It puts the brakes on the ever-increasing rates of college tuition.
What do you guys think? Would this idea work? What problems do you foresee?
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