An idea I had concerning Student Loans

[Bill]

An idea I had concerning Student Loans:

Pretty simple really, wonder why I haven't heard of it before... A lot of big universities have very large financial endowments that they are pretty proud of. Why not primarily provide student loans by requiring students to take out loans mostly sourced by the endowments of the institutions where they attend.

I'm fairly certain you would see things "tighten up" all over. There would be a serious concern over student success and "good" choices of majors. Many majors would probably disappear over night.

What do you think?

Bill

[invalid unparseable]

Anything is better than federal student loans. The lose money supply just gets gobbled up by the universities.

[Wade Gattett]

When I was in grad school back in the 60's, I took out a student loan that I used to buy my first new car- a VW Beetle. Paid the loan back on time after graduation when I got my first real job.

Why is it so hard for the current crop of entitled, special, helicopter-parented kids to pay their loans back?

Too bad Tony Soprano and Don Corleone are gone. Put either of them in charge of the Student Loan program and the debt would be cleaned up in

18 months ;-)

[dpb]

Nobody "requires" anybody to take out a loan...just like credit card debt, it is a voluntary transaction and why it's suddenly expected not to be a future obligation is beyond me.

That many seem unable to comprehend they're getting in way over their heads is also just mind boggling.

As far as endowment-sourced loans, most of those endowments have donor restrictions on the funds that restrict their use to specific purposes and those are considered by the courts as very strong proscriptions against using otherwise. Encumbering them by debt obligation is not covered in those agreements in most cases. (Am president of local community college foundation)

[Ed Pawlowski]

Before you implement that, lets answer another question. Why is the cost of education so high? The same people that complain about corporate profits never ask about tuition costs or salaries of staff.

Also, should all these kids be in college? Too many end up in jobs that can be done by a high school graduate but they are paying for a liberal arts degree they will never use.

[Home Guy]

You're saying that student loans come out of university investment and endowment accounts.

That will never happen. They know the loans are a bad "investment".

A better option is the universities become co-signers or garantors of the federal loans. If the students can't pay them back, the university is on the hook for them.

And do one other thing: Students that flunk out or otherwise do not get a degree get their tuition refunded (or the university refunds the tutition back to the gov't if it was paid for through a federal loan).

Universities and colleges are sitting on billions of public federal-loan dollars that they've built up over the past decade or so from highly inflated tuition costs and the insane drive that kids and parents have (your kids will have no future unless they get a degree). Nobody is asking what the schools are doing with that money, besides driving the S&P to astronomical levels and giving 6 and 7 figure salaries to school administrators and middle management (and creating all sorts of new "social justice" management positions).

[Bill]

I'm sure not all of the endowment money is encumbered. The big schools have some very "old" money. The schools have "real property". They could borrow to help with the loans, if necessary. The point is to give the schools a real stake in the success of their programs. If they choose to provide a loan to a student his is later unable to pay it, they can just attribute that loss later however they see fit. At least they were most likely the direct beneficiary of most of the money. If they admit students who really lack the potential, shouldn't they take on some of the cost when said students "graduate" and can't get a job? As it is presently, they take on none of the risks. The incentives aren't significant enough to promote prudent admission and advising decisions.

Bill

[Alexandria Oprah-Kotex]

Paying back a loan requires modest effort and short-term sacrifice.

Why not just vote in a socialist democrat and have the government pick up the tab?

[Home Guy]

Because someone is giving away boatloads of free money in the form of federal student aid. Take that away and watch tuition (and foolish university spending) fall.

[Bill]

Answer: Partially the same reason automakers have their own finance companies--to enhance the flow of capital.

The same people that complain

Sounds like we are on the same "side". : )

[Bill]

I regard that as completely equivalent.

That's equivalent too.

[Bill]

It appears you may have a chance to do that next fall! Now you know what inspired my idea.

[dpb]

Not all, no, but you can't use Yale or Penn as the model for the entire pool, either.

The age of the endowment has no bearing on the restrictions--they are permanent and go with the fund.

98% of our local endowment _IS_ encumbered as just one small example (we're about a $10M Foundation with a payout of roughly $400K/yr in student aid plus what we do for the institution itself).

[dpb]

But, none of the above is to be construed as being in favor of continuing the federally-guaranteed student loan program, either.

It should just be terminated cold turkey imo as a bad experiment. But, I don't see releasing those who did sign up scott-free, either. The disabled vets, sure, and perhaps a few other particular hard-luck cases, but a general amnesty and pick up the check, no.

--

[Davej]

Yeah? So does Larry's Barber College have one of those? No.

[trader_4]

Probably because the cost of college has escalated significantly faster than inflation, significantly faster than the wages of most available jobs?

That;s the problem with all big govt programs. The folks that favor them only look at the intended effects, ignore the potential for abuse and bad outcomes. They act as if 100% of the money goes to the intended effect. It's true if we had some tough guys that could break knees, they could weed out the abusers and the rest would think twice about taking out $150K in loans to get a degree in art history.

[trader_4]

It's an interesting idea, that's for sure. It would put responsibility on the schools. Would they lend $150K of their own money to someone who wants to get a degree in art history or political science? But IDK under what theory you can force private schools to do that.

[trader_4]

I guess you're not going to vote for Bernie, the Indian, or most of the rest of the Democrats? ;) I don;t get that either. I had student loans, paid them back years ago. Why are this new bunch so special? I'm still paying all kinds of taxes, why not excuse me from that? Where is my big govt program? And that's the problem, the more of these you have, the more abuse. Just think how much better off so many people would be if we hadn't poured trillions into the welfare state for the last half century. And what do we have? The poverty rate is still about the same. Imagine if instead of handing out money, we had encouraged people not to have kids that they can't afford, to stay in school, to straighten up and fly right. Instead we handed out money and basically told people that their condition wasn't mostly their own fault, their own decisions, but that it was the world somehow being unfair to them. Sadly the Democrats want to go full tilt more in that direction.

[trader_4]

IMO, for many of these kids today, they would be better off starting a small business. Parents should consider that, instead of automatically dumping $200K into a college education. That's especially true for someone where the kid has no interest in jobs that really pay well, eg tech, medicine, etc. If it's between $100K for a degree in poly sci or start a small business, I'd say it's a no brainer as far as the monetary part. How much non-tangible value you put on getting an "education' of course is another thing.

[Ralph Mowery]

It seems that the cost of most everything has gone up faster than the wages.

However even at that it seems that many people have more money (or atleast spend ) for things. When I grew up many houses had only one TV and maybe a car that was bought used and possiably an even older one.

This was with my dad and mom both working at reasonable jobs. Mom was a book keeper and dad worked for a store repairing appliances and later at a place building mobile homes.

Now lots have almost new cars, many TV sets with cable, cell phones, and so on. Give up much of that and the loans could be paid back.

Too many going to college and not enought jobs for them. That tends to keep the wages down.