Aaaaahhh…. shadaaaap! And a plan to reform the student loan system

Student loans suck. I’m not going to bother going through all the reasons they suck, as plenty of people have done that before me. I just paid mine off, because I despised paying that crack whore, Sallie Mae, every month.

Nevertheless, I just want to slap some people when they whine about their student loans. Kelli Space, age 23, for example, should get a taste of the back of someone’s hand.

Kelli owes about $200,000 in student loans. She borrowed that much money to get a bachelor’s degree from Northeastern University. Now that she realizes that she is lifepwned, she launched a begging site trying to raise money to offset her debt. (here). Gawker wrote about it here. Kelli wrote to them:

The severity of my situation goes a bit deeper than “I owe this money, help me” – I am actually forced to live with my parents (forced = I am lucky! But…) as the monthly payments for just my private loans are currently $891 until Nov 2011 when they increase to $1600 per month for the following 20 years… attached is my payment plan. I also mentioned I have a job – which is great! And I probably have my college education to thank for that! Except there is still no way to make these monthly payments, and live on my own as a contributing member of society. Neither of my parents, nor I, really knew how this would pan out — unfortunately — and now that I’m here, I see no real light at the end of the tunnel. (source)

I can say with absolute certainty that there is NOTHING that you could possibly learn at Northeastern University that is worth $200,000. I’m not down on Northeastern. I can’t imagine a BA from any university on earth that is worth $200,000. But, apparently she borrowed $200,000 to get a degree in … wait for it … sociology. Oh, yeah, there was a study abroad program in that little financial time bomb too.

Look, someone has to study sociology, so I won’t shit on that discipline (I respect it actually) … but she couldn’t have gone to some SUNY school (I think she’s from New York) and gotten in-state tuition? Was the study abroad program really necessary? Or was it like every other study abroad program — an overpriced vacation?

Naturally, I have neither sympathy nor respect for Ms. Space. But, lets not blame her all by her lonesome. She got taken for a ride.

The student loan system sucks, and it needs to be reformed. There’s no goddamned way that her education was worth a quarter of what she paid for it — she got ripped off. You know why? Because the school knows that it can sell its bullshit “education” for $200,000. Why? Because the people buying this garbage are 18 year old idiots. You tell a kid “sign here” and she does. To make it worse, the debt isn’t dischargeable in bankruptcy, so she’s stuck with it.

I agree that student debt should not be dischargeable in bankruptcy. But, here’s my modest proposal for how we fix the system:

  1. Student loans must be co-signed by the school itself — if the student does not pay, the school is financially responsible for the debt.
  2. The school can still sue the student for reimbursement – no discharge in bankruptcy.
  3. If you have a professional license of any kind, doctor, lawyer, etc., you lose it if you default on your loans.

Do you think that Northeastern University would ever have let this girl borrow $200,000 for a fucking sociology bachelor’s degree if they knew that the $200,000 was going to come out of their ass? Hell no. She’s never going to be able to pay that back with a sociology degree — not unless we get Weimar Republic style inflation, which might make the balance meaningless.

Under my plan, you would likely find schools simply loaning the money themselves. Why put the extra friction in the machine that an outside usury brings to the equation? The problem with higher education is that guaranteed student loans create an imbalance in the market. Every other loan market is prone to bubbles and errors (just look at the recent housing debacle) but corrections do happen. Loans to 18 year olds for life-crippling debt numbers are bad enough, but loans of this magnitude with zero evaluation of the credit worthiness of the person (or the endeavor) are insane.

If the school doesn’t want to co-sign the loan, students could still be free to go to banks and beg for loans. However, just like any other business loan, the student would need to demonstrate that the loan is a good investment. If someone came to me and said “I want to borrow $60,000 to study engineering at the University of Massachusetts,” that might be a good investment. If that same person wanted $200,000 to study art history at Bennington, well … I hardly think that would be a prudent use of my money.

It would seem that this plan would cure a good number of ills in the legal profession as well. Every law school chases the U.S. News Rankings like a dog digging for a shit-filled diaper in a trash bag. Then, every year, law students and law schools scream about the rankings and say that real employment figures should be factored in to the rankings.

If the school was on the hook for the loan, U.S. News would wind up where it belongs — recycled into toilet paper. Schools would be pretty damn committed to getting their students jobs, and those that were not would dry up and die under the blistering heat of the free market. We would likely see 25% of the law schools close, and most of those remaining open would be forced to drop their tuition. Law professors might suffer a little bit of a pay cut, but let’s face it, 75% of the full time profs are worthless anyhow. The legal teaching field would likely start to embrace more adjuncts – meaning more people who do the thing that they are supposed to be teaching.

Everyone of any value wins.

19 Responses to Aaaaahhh…. shadaaaap! And a plan to reform the student loan system

  1. Congrats on paying off your debt!
    And thank god someone else agrees that people over 18, especially those who are “smart” enough to get a degree, should be held accountable for the financial and legal decisions to make.
    Really, people are suprised that when you pay on installments with interest the amount you will pay back is actually more than the amount you borrowed?

    Idiots.

  2. J DeVoy says:

    Point of order: Northeastern generally grants its degrees at the end of a five-year program that involves some kind of interning and other real-world experience. On one hand, it’s kind of TTT for the University to have to get its grads into jobs like that, but the reality for grads from schools outside the ivy league and similarly situated elite is that you get jobs through who you know, and any advantage is a good one. If the sociology degree is on this five year timeline, it may contribute to the $200,000 figure – I can’t say for certain. That much coin for any undergrad degree is ridiculous, though my first read of the word “North” was with the expectation that it would end with “western,” making it a slightly tougher case.

    • The Northeastern Co-Op program is one of the reasons I think it is a great university. But still… nobody should even be $100,000 in debt for a BA.

      • J DeVoy says:

        I agree that it’s a good program for most grads, but is an adverse signaling mechanism for the University in light of the many schools in Boston (and Cambridge) that don’t need to use it for job placement. Or didn’t need to, anyway; the employment rate for recent grads is quite low.

        • Marc says:

          Please share the information you have on the employment rate for recent Northeastern grads vs graduates of other area schools. As a two time graduate of NU, you’ve got me wondering who you’re comparing them to and by what method.

          And to clarify, the College of Arts and Sciences has (or had) different requirements for co-ops than the other schools. As far as I know, the sociology majors of NU were given the option to, but were not required to participate in the cooperative education program. Usually, they would do on campus research, etc. in lieu of co-op. Same for a lot of the math majors, physics majors, etc.

          • J DeVoy says:

            It’s pretty obvious that Harvard/MIT/BC/BU > NU, and none of the former have a Co-op program. I have no ill will toward NU; I applied there (along with BC and BU) for undergrad. My comment about high unemployment rates applies across all universities and was not targeted at NU.

            Also, yes, NU has different standards for co-op programs across majors. I was careful to hedge my initial statements by saying the co-op year was “generally” required for a degree, as it’s something I know they have, but don’t have all the details regarding its operation. NU is just unusual for having that requirement to some degree as a main feature of its university-wide curriculum, as the vast majority of universities do not.

        • MikeZ says:

          I don’t think it is a ‘formal’ program at a lot of the other schools but I went to RPI and while required co-op program existed most of my classmates still took off a semester for co-op. In my case it definately helped get better job offers at graduation but perhaps only because I was relatively more interesting than my classmates who didn’t have any actual work experience to talk about.

    • Bad Monkey says:

      So it’s wrong, or kind of TTT, of a school to actually set up an interning program where employers get to try before they buy so to speak?

      This of course compared to grads getting hired due to the name recognition of the school they went to.

      TTT should, IMHO, be about the quality of the education. If the education sucks ass then certainly it’s right to call them on it. If you wanted to call them TTT because of the cost of the education vs. the product delivered I’m with that too.

      However, if we want to compare which of these methods of job placement is more craptastic the answer is clear. Harvard – Hire (at a premium) essentially because of the name and hope they work out, Northeastern – Try them for up to a year (at a discount) and see if they are any good. Hmmm, what would a smart boss do? Take the expensive option of hope and pray, or take the cheaper one and then hire someone else if the first doesn’t pan out?

      On a separate point, how much of that $200,000 went to the school and how much was her living expenses?

      Lastly, Kelley is a moron. I wonder if this is her:
      http://www.facebook.com/#!/profile.php?id=1813547

      Because I would love to see the pictures of her during college.

      • I agree. I think the co-op program is a superior model, and one that would likely prevail if schools were on the hook for the loans themselves.

        Kelli has turned her FB page to private.

  3. DannyLedonne says:

    Kelli Space’s problem is that Kelli’s Space is boring. She needs a website with extra-cute photos of her looking vulnerable and with the slight implication that if you give enough money, she’ll send you a pic with her shirt off and if you give even more, well… as a Northeastern-trained sociologist she should know all this already.

  4. Anon says:

    If you want the price of education to come down, the only way it will ever happen is to make the loans dischargeable in bankruptcy.

    Have the school cosign, yank professional licenses, yada yada yada, but without dischargability it’s all useless bullshit.

    And you should know better.

    • You might be right about the substance. I’m not sure if you’re right about the fact that I should know better.

      If they are merely dischargeable in bankruptcy, then the government will be the party paying the loans, since the government backs the loans. I dont know about you, but I am already sick of paying taxes for the bullshit wars we are in and for other pork projects. If I have to pay a penny in tax dollars so that this self-indulgent crybaby can spend $200,000 to go boozing on Huntington Avenue for four years, I’m going to grab a kalashnikov and go postal.

  5. Anon says:

    Fair enough. End the federal guarantees and make them dischargeable.

    • The only thing I don’t like about that is that it doesn’t force the schools to get their acts together.

      I think that if the schools are on the hook, they’ll start delivering a product that actually gives some value to its customer.

      And… I think that if they are dischargeable, then at the very least, the degree should be revoked if you don’t pay for it.

      • David says:

        The problem is that demand is incredibly high because going to college isn’t seen as an investment, it is seen as the next step. Because that is how people are brought up and what they are told from the time they are very young.

        College in this country is seen as not only as always a good investment, but as the only way to get ahead in life. It is the opportunity maker. At least it was for our parents.

        The system as it stands builds up an incredible demand for education with a thought-free loan system. Loans are automatic. There is no pain in getting a loan and so there is not much thought that needs to go into the loan application process. This is a problem. And it’s true for the lender and the borrower.

        It also drives up the price without any guarantees. The problem with the education bubble is that the government regulates (and takes part in) one side of the transaction—the financing, but does nothing to control costs. (This is similar to the housing bubble because the government wants to encourage people to become educated like they encouraged a home ownership society.) This allows the schools to charge runaway tuition rates (10% year over year)—which was unheard of even during the housing boom.

        What needs to happen is one of two things:
        1) Less government intervention- have government get out of the loan market all together. Also, allow more flexibility in discharging student debt from bankruptcy. Either setting a more flexible standard for hardship, or a limit like allowing discharge after 10 years from the last student loan disbursement. What this would do is to stop the moral hazard of the wave of filing post-graduation and have it still be an option for a clean start for those that truly have few assets and no income. The one’s a college education failed. In essence, create a market where a person (or many of the riskier investments such as those with a high potential principal amount combined with a low yield earning potential) could be denied a loan based on risk.

        2) The other option is more government intervention. This could take the form of limitations on schools that accept student loan money; such as a cap of the increase in tuition rates. This would keep schools more affordable and would lower the risk on the lender/government. This could be coupled with changes to the bankruptcy rules that I mentioned.

        The problem right now is that there is no good system in place. The status quo creates a situation of indentured servitude to the lender that can never be repaid in many instances because of the awesome tuition bills students get from their colleges.

        This problem will only get worse as long as the money freely flows and colleges and universities are allowed to keep raising rates and loan providers are allowed to shackle students with debt, and students are told that college is the only way to a better life and that it should be the automatic choice.

  6. Jennifer says:

    $200,000 for a BA!!! That is BS! I owe less than that and have a BS, a BA, and a JD?? I just started paying on mine. Ouch (not going to be rich anytime soon), but it feels good just putting a dent in them. Hopefully, Starwood keeps doing exceedingly well in the stock market and I will have them paid off in just a few years!

    • Jennifer says:

      PS – I am paying them off as a single mother of an adult with disabilities and while supporting my infant grandson. So poo poo on those who say they cannot!!!! I want to move back in with my parents and let them pay my living expenses!

  7. Well, that’s brutal, $200K for a sociology degree. At Northeastern, no less. I’m now of a mind where I think formal education is just another consumer scam.
    Apart from lame overpriced local institutions which are basically feeder schools to jobs at Starbucks, you can get $30K to go learn how to cut hair, and I’m pretty sure Barbizon School of Modeling can hook you up with some kind of federally subsidized financing while you learn to balance an apple on your head.

    Her blatant begging is pretty tame, I have to say. In this tell-all, write-a-memoir-and-reveal-all-the-dirty-laundry world we live in, straightforward begging is almost comical in its naivete. She could of at least said she had lost both legs in a rollerblading accident or something. Stir the embers of pity, maybe.

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