THE WOLF STREET REPORT: What to Do About the Student-Loan Fiasco?

The University-Corporate-Financial Complex is going to squeal.

OK, I’m going to wade into this debate. And I’m going to do it with my boots on (11 minutes).

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  218 comments for “THE WOLF STREET REPORT: What to Do About the Student-Loan Fiasco?

  1. Little Augie says:

    Be sure to wear hip boots!

  2. Raymond Rogers says:

    What you say is true. I ask why is it that if you build a ladder, the government cares how safe it is, yet allows an unregulated market regarding college offerings? If it is backed by taxpayers, there should be strings attached.

    I would go with what you propose going forward. With existing debt, two things come to mind. If liquidity needs to be injected into the market in the future, it needs to be done with helicopter money to the masses. Those who owe college debts would have their portion applied to their college debt. Also, if needed be, existing obligations should be spread over 15-20 years.

    The textbook issue has been a longstanding one, and it has gotten worse. You now have to ave a license key to your digital copy. It’s not like you can go to a used bookstore, and buy an edition that has a few more pictures than the previous edition.

    But it must be said that these adults need a swift kick. Credit cards were offered all over campus when I went decades ago. The stupid took them and ran up the debt. I was under no illusion as a college student without a full time job (only worked part time during the semester and full time in between) that I could afford to eat out often. Yesterday, I grabbed some food near a major campus. The eateries were packed with young college students. Mist be nice to feel entitled.

  3. Javert Chip says:

    Well, you said you were going to wade in with your boots on, and indeed you did. I expect this thread to be very active & long for a few days.

    I’ve previously been told that forgiveness of student debt is “social justice” (not to be confused with political vote-buying).

    That’s an interesting opinion in light of every student loan requires an explicit contractural promise to pay back the taxpayer. Social justice my ass; this attitude is pure entitlement & self-centered greed.

    • Redwood says:

      So, what about the bailouts that the big WS firms get? What % of GDP is that?

      • sc7 says:

        The bailouts they paid back with interest? This is such a tired argument. That saved the economy from cratering, which would impact everyone. And they

        Forgiveness is permanently forgiving debts predominantly middle and upper middle class people willingly signed on to.

        The two aren’t remotely comparable, but it doesn’t stop the “Wall St vs Main St” narrative.

        • Rat Fink says:

          What about the plunge protection team stepping in day after day after day to buy shares of failing companies?

          Is every single one of these companies TBTF? I don’t think so.

          If you want to talk about saving the economy from cratering did you ever consider the fact that that every student who has been jacked for ridiculous amounts of tuition and is saddled with this debt will NOT buy a home – will NOT buy a car – will NOT go on a vacation etc?

          Do you not think that this situation also has the potential to crater the economy?

          Obviously not….

        • sc7 says:

          @Rat Fink,

          Can you show me concrete evidence, not speculation or conspiracy theories, that the fed is buying shares of companies en masse?

          It has been discussed many times, student loans will be a slow drag on the economy, but they will not cause a crater and are nowhere close to the magnitude of the housing bubble. Don’t forget, that money went somewhere. It may be highly-paid admins, evil textbook companies or whatever, but that money is fueling consumption elsewhere in the economy. Forgiveness is just double-dipping at the expense of the federal deficit.

          The median student loan debt is something like $34k, while the median lifetime earnings difference for a college grad is several orders of magnitude higher. Sure, there are outliers, but overall, most should not have trouble paying it off. I have no care if people don’t get to go on vacations…

          I’m all for making education more accessible, but once again, blanket forgiveness is neither the answer nor a necessity.

        • AlamedaRenter says:

          Wall Street only paid back the loans from government.

          They never paid back all the pensions and 401k that lost massive value. Never paid back all government services and school budgets that were bankrupted due to killing the economy.

          They got off easy and broke the law. From massive foreclosure mills with fake signatures to Rating agencies giving AAA rating to piles of shit.

          Many communities still haven’t recovered.

        • sc7 says:


          Why do you think they should have to pay back those pensions and 401ks? People accepted that risk when they entered a non-insured investment.

          Regardless, we’ve devolved so far past the original topic that the analogs to forgiving personal debt are no longer even there. Bad Wall St. behavior does not justify more bad behavior.

        • Yes, my information has it they buy the futures market, and buying shares of any company, or for that matter futures would be a violation of Congressional oversight. Validity aside the impact of these alleged interventions was made moot during 2008. It’s akin to a moonlanding denier suddenly finding out the White House is staffed with space aliens.

        • JZ says:

          Let me suggest. Every student with loans can borrow from FED fund’s market as those bailed out banks and student can buy treasuries and capture the spread. I guarantee you those students will put wall street out of business. They.Paid.It.Back….

        • JZ says:

          Let me suggest another way. FED lend student money to buy back their loans say 20K and then, 6 months later, FED buys from the students at 40K. This way, the student can return 20K to FED as he borrowed to buy his loans and spend another 20K on vacation. They.Paid.It.Back….

        • ZEPPO says:

          Yes……loans were issued and paid back from 2008 through 2013 as banks continued to have their ratings cut because of huge cash outflows needed to meet derivatives margin calls. The public, however, knew little about the proceedings. We can find fault with Bernie Sanders for many of his issues (yes….including his wife’s questionable dealings at Burlington College). He did one thing, however, for which we should be grateful. He wrote a portion of the Dodd-Frank bill to include the first ever partial audit of the Federal Reserve. Ron Paul had been trying to get a Fed audit for thirty years. Sanders said Congress merely turned over the checkbook over to Bernanke. The people had a right to know where the money went. So a GAO report was issued in 2011. It’s a long report. Page 131 lists the financial institutions that received the lion’s share of that 16 trillion dollar additional bailout. Sanders used to have this report on his website. We don’t hear a lot about derivatives these days unless Paul Singer is on CNBC talking about the 700 trillion in interest rate swaps. Are you all aware that the major banks/wirehouses found a way, through the Fed’s own bylaws, to transfer the risk of those derivatives from the companies to the taxpayers? It’s not rocket science. It’s just a matter of placing them under FDIC umbrellas.

      • arihalli says:

        i agree. Wall Street was made whole by the 99%

        Financial engineering was used. And then they were loaned $$ at almost zero interest rates that they used to increase their balance sheet.

        Students get no help, and can’t go bankrupt, and have no financial engineering tricks.

        • Javert Chip says:


          EXACTLY which Wall St firms were made whole by the 99%? And how were they made whole?

          I do remember Buffett buying $5B of Goldman Sachs preferred stock, on which Berkshire made $1.5B in interest and $1.27B in capital appreciation over 3 years…plus Buffett got warrants to buy another $5B of Goldman stock at $115/shr (then trading at about $158, so Buffet had a paper profit of another $1.8b)…Berkshire still owns most of the Goldman shares from the warrants, which are now worth about 200% of the warrants price.

          Buffett seriously beat up Goldman Sachs, and, just like Bernie Sanders, Buffett’s definitely not one of the 99%.

          Can’t wait to see your response.

        • Jon says:

          The universities need to pay the loans, not the taxpayers. It was greed that raised tuition, not the rising costs of getting an education.

        • NBay says:

          Chip- If it were me writing that bit of financial history, I would have added along with Buffet, Jamie Dimon waited patiently with a very low ball offer and picked up Bear Stearns for not much more than the value of the lot it’s NYC building was on, 15 minutes before the Asian markets opened, and like Buffet, became a hero to the Financial Gang, and an aspiration.
          Choosing Bernie Sanders is almost as obvious as Sean Hannity, et al. Why don’t you just call him a crazy socialist like they do and let it go at that. You are not going to change any minds here. Post your political stuff on Yahoo, someone might buy it there.
          I would wager you are a 1%er or much less, and worried about your “hard earned” money, future increases in your pile, and whatever it is you blow it on.

    • Arctic Chickens says:

      And a smack in the face to anyone responsible enough to work through college and accrue no debts, or pay off their debts.

      Appalling. But not surprising.

      • davie says:

        Wow, both of you are steeped in your own entitlements when you take a second to look at it with the perspective that the rest of the developed world looks at it. And the amount of proudly displayed schadenfreude that others need to suffer to get the good life is astonishing.
        The rest of our civilized world see education as a public good, that each citizen has a fundamental right to pursue, not only for personal financial stability, but as a means to having the most educated electorate possible. So you know, they don’t go voting for a demagogue or something.
        So instead of seeing the value in an educated citizenry, you’re advocating for keeping a predatory loan system that the federal government has been underwriting for years. The rest of the developed world literally sees this civil issue as if the fire department showed up to your burning house and offered you a payday loan before extinguishing the fire. Sure there’s some moral hazard with this system all around. The firefighters could eventually extort the victims and spend the money on the finest cashmere and silk lined suits, and the resident could opt for burning open candles all the time, even when not home, but again that’s why the rest of the world sees this as a public good that should be nationalized. Then there’s some credible reason why the administration and financilization of these institutions needs to be made transparent and responsive. Something you’ve never been allowed to consider if you’ve gotten used to the Koch brother’s deregulation koolaid.

        But it’s fine, you can believe whatever ideology you want, without considering the alternatives or practicing criticality. You can even pretend that a student debt payment program won’t have any provisions for back pay to those who did “responsibly” cowtow to the loan sharks. Because I guess that wouldn’t be justice.

        It’s like the experiment where they spray the whole group of monkeys with water each time one of them tries to climb up to get some bananas. They eventually become cultured to the point that they punish each other instead of getting sprayed with water. And slowly you can even remove the original monkeys that witnessed the banana-water spray causality, and the monkeys will still go on punishing each other, so that none of them get the bananas, even though the bananas are now free to get.

        • GP says:

          You want to help out, that’s great. Please do it with your own money though. My money had nothing to do with it – so please leave it out of this. Moreover I need it badly to feed my own family.

          If you can recover bailout money, more power to you.

        • sc7 says:

          Paying back a loan you signed on for is cowtowing? Here I thought that was called being a responsible adult and sticking to my word.

          How much bailout money are you holding out for someone else to pay your loans?

          No one is arguing that public education shouldn’t be more accessible (in my case I agree with moving it toward free), but making the current system free will just further advantage those well off enough to go. We need to rethink how we educate for the future, which may mean 2 year programs for a lot of tracks, not 4 year degrees.

        • Setarcos says:

          @davie “you’re advocating for keeping a predatory loan system that the federal government has been underwriting for years”.

          You put your finger on a key issue. The private lenders were actually underwriting the risk of the loans. They had accounting standards. That all changed. Student loan stat’s are the results.

          The most expensive education is a bad education. The most expensive education is a free education. Visit a few public K-12 schools and take a peek.

        • T.J., no the real tj says:

          Yes, when I committed 6 years of my life to the military to pay for college it was because I was steeped in my own entitlements. But I only had to go to war once, so I’ve got that going for me.
          I guess I should keep my mouth shut and pay for someone else’s delayed maturation.

        • Jon says:

          When people say they paid their tuition with a summer job, it means the graduated before the 1990s. They don’t realize that tuition has quintupled in many schools since then.

        • DawnsEarlyLight says:

          Wow, you’ve gone bananas!

        • davie says:

          Wow guys, way to go, advocating for modern indentured slavery without addressing any of the underlying issues.
          No one can address the civil value in providing a good education to the citizenry, no one can address the deep schadenfreude of watching others suffer with predatory debt they were just lucky enough to dodge, no one addresses that putting money back in the hands of the educated working class might actually spark the economy and create competition, and instead most continue to beat others down, insisting that their own station in life was brought upon them by solely by their contributions and now are entitled to any fruits that happen to pass through their hands.

          As Upton Sinclair wrote, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

        • GP says:


          You are conflating the issues here. Being opposed to taxpayer bailout of student debt is not same as being against educating citizenry.

          Wolf has suggested several ways to tackle the problem. Many more valuable suggestions in this comment section. Perhaps you can go through them again with an open mind.

          As for your other comments, there are so many other ways of putting money in people’s hands to spark the economy – give money to retirees who couldn’t save enough, give money to people who took out mortgage to purchase (now worthless) taxi medallions, pay off people’s mortgages.

          Why don’t you just start a giant go-fund-me to pay off all student debt? Please don’t steal my money to pay off someone else’s poor financial decision.

        • davie says:

          The cognitive dissonance of advocating other government spending for groups that could be said to have”made bad deals” while still shilling for indentured servitude is mind boggling.
          You even doubled down on insisting that taxes are theft, even after I dissuaded the Koch brothers mumbo jumbo from the start.

          please, go back up and read that Upton Sinclair quote again.

        • GP says:

          I shouldn’t feed the trolls, but your are a gem.

          I am not advocating paying any other groups – that was just highlighting absurdity of your demands.

          Tell me, why stop at student loan forgiveness? Why not pay off everyone’s mortgage? auto loans? personal loans? With a citizenry freed from monthly debt obligations, economy would soar, right? Sinclair would be proud.

        • sc7 says:


          Your hollier than thou Upton Sinclair quotes from your English Lit degree may not pay the student loan bills, but I knew from a very young age that I needed to study something that would. My degree(s) can, do, and then some.

          We enter a whole new world when we set the precedent that an agreement to pay a loan is no longer meaningful. The impacts to society from that could be significant.

        • Davie says:

          Wow, you guys really take the cake here.
          You’ve brought quite the medley of arguments to the yard here.
          The classic “I was only pretending to be an idiot.”
          And then some good ole fashion slippery slope fallacy, or even straight up misguiding conflation,when I previously drew the line between what public services shouldn’t become private debts.
          And then making gross assumptions about being a liberal arts major that can’t pay bills, when the reality is I’ve got a stem degree, with no debts to pay, and gladly pay a European level tax rate.

          Money is a power structure and you are good indication of how the powers that truly rules over us are the powers one is not allowed to critique.

        • ZEPPO says:

          When I was 24 and married but without children for another three years, I took out an insurance policy at work through payroll deduction. The only goal of this policy was to cover the college tuition for the children I would have. Twenty eight years later, the cash value of that policy would pay off the remaining bills that weren’t covered by athletic/academic scholarships. The thought of me being saddled with the college debt of families much wealthier than I is justifiably repugnant.

        • davie says:

          too bad you don’t have accessible to an affordable education system to learn that’s not how government debts work.
          the only politicians asking you to pay for those debts are crooks and swindlers, especially when we sustain a system of corporate welfare for any company producing goods for the military.
          please refer back to the very beginning, and read how monkeys become cultured to berate each other.

        • NBay says:

          Wow Davie! That simple and completely obvious observation of human nature by Sinclair sure brought out a lot of action. I am truly struggling to understand why anyone would find fault with it.

      • Morty Mc Mort says:

        Bigger Smack in the face for anyone who went straight to work from High School and worked their way up, and anyone who went to a trade school and accrued almost no debt – Acting responsibly… once again, the responsible people are punished, and the irresponsible ones get a reward!

        • rhodium says:

          A lot of you have no idea what the trades are like these days. Yeah, you’ll be debt free, but there’s a lot of downward wage pressures and increasing competition. If you’re young, smart, and hard working it could be a good career for like 15 years maybe. A lot of guys get ****ed up backs and joints though, most don’t manage to save a dime, and the next thing you know they’re just broken with little recourse. I’ve met a number of tradesmen who forbid their children from following in their footsteps and made them go to college.

    • Frederick says:

      Exactly I certainly is

    • MCH says:

      Social Justice, right….

      Imagine with all of the politicians talking about forgiving student debt. Then all the students and former students get a bright idea… stop paying. Flash decision to get out of jail free. Then it becomes a real crisis, and then the debt forgiveness is good idea because now everyone is screaming for it, from students to wall street to universities. Once this line ends, they’ll bring back student debt and the cycle will repeat again.

      Imagine this going on and on and on. Until there is a mandate that university education should be free just like it is in Europe.

      The problem with these ideas is that it just a way to get out of responsibility for a bunch of people. You know what, if the student loan forgiveness becomes a thing, I’m going to demand that the old student loan I paid off two decades ago be refunded to me, with interest.

      Because, it’s social justice. You can’t do the right things until you correct the systematic mistakes of the past, or that kind of BS, right? Isn’t that what is being preached. In the name of fairness, I demand my fair share. I should also be in line first, because the injustice being perpetuated on me has been occurring far longer than the injustice perpetuated on the current crop of students.

    • RepubAnon says:

      Let’s go back to funding the state colleges and universities. This way, the need for student loans would drop, and there’d be pressure on the colleges to rein in administrative costs.

      Unlike the debts imposed by private equity firms on companies they’ve purchased and drained, student loan and credit card debts are very difficult to discharge in bankruptcy. This encouraged a number of private schools to bilk the desperate into taking out student loans for schooling that proved useless in the job market. As the lenders knew the loans couldn’t be discharged in bankruptcy, few were concerned about issuing the loans.

      The free market is a wonderful thing – but it depends upon consumers having sufficient knowledge to make rational decisions. Hard to do for things such as education, especially if the schools lie about their success rates

      • Raymond Rogers says:

        Public schools lie about their success rates.
        Public school professors do what their counterparts in the private sector do- give everyone an “A” for showing up with a pencil. If you dont get students to take your class, you get less classes to teach. Profesors know students teacher shop on rayemyprofessor to find who demands the least amount of work for an ‘A’. They get to keep the GPA high and spend more time partying.

    • Otishertz says:

      No “forgiveness.”

      Let these debtors go bankrupt and discharge their unpayable debts. They were sold a bill of goods.

      The the only path that is not a moral hazard is a discharging of debts, like the normal bankruptcy proceedings available to corporations.

      This class of debtors has no way out. They can’t bankrupt themselves out of responsibility like the Sackler family and Purdue did after killing hundreds of thousands of actual living, feeling, human beings with families by vending their opiods like they were harmless.

      Restore the right to discharge unpayable debts for student borrowers through bankruptcy. The banks that lent them money are more sophisticated than an 18 year old. They only lent it because they have to die before they can renege.

      Discharging this debt through bankruptcy would curtail the excesses of the squishy penguins who like having plush offices instead of the closets that they inhabited when I was forced to pay them 25 years ago for the same bullcrap dream that was hard sold to these kids at 3x the price.

      These poor kids are overpaying to support the retirement of clowns who can only speak words previously written by others in mandatory textbooks.

      Mandatory textbooks.

      Mandatory textbooks.

      Textbooks recited by rote via bureaucratic eggheads in a miasma of dogma. That’s what they are selling.

      My friend sent her daughter to Amsterdam for college last month. Costs 1/3 of US college tuition and takes a year less (3) due to the lack of required “elective” social programming courses.

      People have been leaving the US for medical services for some time. Now they are leaving the US for education.

  4. Michael says:

    Let the universities and Wall Street fail.

  5. Arctic Chickens says:

    Very frustrating problem. These institutions need to be forced to trim fat… This summer featured a lot of drama when the governor suggested the state university system take a 40% haircut in state funding, about 20% overall. Rather than sit down and talk the university system president utilized university assets and personnel to whip the public into a frenzy, suggesting that to cut the university budget would destroy everything good in this state…

    I’m a tiny minority: a university affiliate that believes the cuts are necessary. 56% of the system’s budget is payroll, but just a quarter of that is spent on actual faculty. I worked 4 years as a student laborer in campus facility services, and I can tell you only a small fraction of that other 40% is going towards maintenance personnel and student workers… 5-8% at best. The rest? Administrators.

    About once a year someone in the offices near the campus chancellor would retire, precipitating a work order to move offices as the ladies working there jostled to work closer to the big man. In one case a woman spent the whole day sanding and staining her bookcase as we moved her things…

    The bloat is unreal. I advocated then and now for a serious restructuring NOW. This level of waste can’t go on forever, and waiting until a serious curtailing of federal financial aid happens risks the whole institution.

    The president did finally sit down with the governor to talk, a month and a half later. The result? A negotiation to a 20%(10%) reduction over 3 years, a huge level of unneccessary stress for most of the state, and the loss of a good number of faculty who smartly decided that if the problem was as dire as the university administrators and their “not university affiliated” advocacy group’s internet and radio advertisements made it out to be, they’d be better off finding work elsewhere.

    What a disgrace.

    • Trinacria says:

      Truly a disgrace indeed….saw this myself – see my comment below. Brings to mind what someone (can’t remember who) said about cutting waste in gov’t and institutions such as colleges:
      “site unseen, cut the budget in half…then site unseen cut it in half again…it is at that point that you then go in and look for waste”. Exactly !!!
      Only a depression will wake us up at this point !
      It truly angers me as the son of immigrant parents who sacrificed much and who even answered the call to serve as part of the invasion force at Omaha Beach (WWII) which my dad managed to survive somehow…why, because it simply spits in the face of all these heroes who sacrificed all so that we could have a life. The current behaviors will lead to a depression as I believe that such events are sociological and behavioral in nature but manifest themselves financially….truly the consequences of mass behavior. We will stay tuned.

    • rhodium says:

      I worked several positions while at university, and I can affirm this. I was in one position where I was constantly cc’d on emails between administrators, rather unnecessarily I might add, but their thirst for attention knows no bounds. On a daily basis nonissues would constantly be brought up as issues, and even if it was an issue, often it seemed so unimportant there was no way the marginal benefit of solving it could have possibly justified all the salaries of the people responding. Unfortunately, how it usually went was so and so upper administor sends out random mass email before lunch every day, and then, all the underling administrators would provide “input.” Generally speaking, the feedback was just a lot of smoke blowing, vindicative and good old fashion brown nosing type responses. From my perspective, it seemed like that was literally all they did all day. When their big projects/ideas were unveiled after addressiing all the nonissues, the substance was generally underwhelming.

    • John Taylor says:

      “This level of waste can’t go on forever…”
      The scary thing is that it can. In a world with negative interest rates, oligopolistic market systems, and overreaching government – all aimed at supporting the connected few on the backs of the many – the question is only how fast can this waste can increase year over year.

      The only risk to it is massive political upheaval, but as long as they can keep voters distracted and divided the show will go on.

  6. Trinacria says:

    I retired in 2016 from a 30 year career as a college professor. June of 2016 was indeed one of the happiest days of my life as I no longer needed to witness on a daily basis all the waste, non sense and misguided expectations from both administrators and many students alike. Truly nauseating ! (not to mention all the left wing B/S)
    How true the line from the old Ghost Busters movie that went something like this – if memory serves me right – after blowing up the lab at the university…
    Actor 1: Oh my God, they are going to fire us!
    Actor 2: don’t worry, we will get a job.
    Actor 1: do you mean out there in the real world?
    Actor 2: yes, of course.
    Actor 1: I don’t know….I hear they expect results out there !!!

    Truer words were never spoken !!! I saw this first hand – repeatedly !!! Of course they don’t want the gravy train to end. I am looking forward to seeing many colleges going into BK and even closing…the likes of (from memory) Burlington College as mismanaged by the wife of Bernie Sanders. Really beyond words.

    • Gold is says:

      Well, Trinacria now that you’ve retired on a fat pension you can throw stones at the waste, non-sense & misguided expectations indulged in by your old college.

      Of course, you wouldn’t have considered doing so whilst employed; college might have gone broke and you wouldn’t want that while still on the payroll.

      Really beyond words.

      • Setarcos says:

        Gold, If Trinacria did the job well, then doesn’t deserve that quip and certainly didn’t create this mess. We are all served well by examining what our role has been in this mess. Being a witness is not a crime. Ad hominem attacks don’t help anything.

        • Trinacria says:

          Interesting that you feel comfortable making that blanket statement without knowing the facts, let alone the personality involved. Rest assured, that I will not resort to such tactics. The simple fact of how I spoke (part of one of my posts) of my father answering the call of Omaha Beach should have been a clue. My father did pass this sense of duty and frugality on to his children. The fact is, I did take on the admin at the college by calling them to task on any and all issues that I believed were wasteful and non transparent. I called to task the professors union on numerous occasions who often did the admin’s bidding. I even wrote to the Secty. of State (in my state) about the misuse of college property in campaigning for certain initiatives. I spoke out again the PERS system and how it was in need of serious reform. These are just a few examples. Needless to say, many folks at the college were happy when I retired.

          Thank you to Setarcos – obviously a sage person.

        • NBay says:

          Gold’s comment is actually just a different way to put Davie’s Sinclair quote. My problem then becomes, why would one choose to bite the hand that feeds it, or even claim they did?
          And I am still quite baffled.

    • Old-school says:

      I paid for my son and daughter’s bachelor degrees. Both are gainfully employed. My don decided to get a PhD and I told him it wad on him and he got it free with a small stipend. Five years is a long time to live on a stipend so he used a student loan to enhance his lifestyle, about $40,000. It’s tough paying off debt, but everyone needs to get in debt when young and dig their way out so you know how difficult it is and learn the lesson for life.

      Paying off someone else’s debt isn’t really doing them a favor.

  7. Greg says:

    Could not agree more, Wolf. Glad someone is saying this.

    • Brett Austin says:

      Great comments on Wolf’s Student Loans.

      I graduated from Oregon State in 1967 with no loans but paid out of state tuition
      for every year since my original residence was Boise, ID. Now Oregon State gives in instate tuition for illegals !!! Really ?
      Next I happily served in US Army (we had too), then to grad school with student loans which I paid off as fast as possible.
      My majors Engineering/Intl Business – lots of great jobs!

  8. Mark says:

    Perfect time to get a student loan then simply wait for it to be forgiven, if they don’t just give it back.
    Quick buck…a la American
    But if they do forgive loans they can never offer loan again, the industrial complex collapses.

  9. Brixton77 says:

    I think better than forgiveness would be just to restore individual bankruptcy protection to the borrowers and, going forward, require that universities co-sign all new federal loans in the event of default. That would (a) remove the incentive universities now have to mislead kids (and these are mostly teenagers) about the consequences of borrowing, (b) force universities to trim their bloated administrative budgets in order to survive, and (c) help people with truly un-payable debt, but at the cost of ruined credit for a number of years.

    • MarkinSF says:

      Exactly right. Include in that legislature a resolution that forbids garnishment of social security checks. I think Wolf pointed to some of your ideas in his fabulous and (for an 11 minute piece) very comprehensive report. His insightful understanding of all the elements of this financialization scheme is why we all turn to this site on a daily basis.
      On one level it is almost impossible to separate the wheat from the chaff when it comes to who used what funds for what purpose so that the principal of fair play is a slippery slope on this issue.
      On another level the private institution scam universities (and there are many) should be cut off of funds immediately and students who got baked in these scams should receive forgiveness in cases where it is proven that promises of job placement were outright fabrications.
      From the justice perspective, these students were obvious victims who, in most cases, cannot possibly find employment that would enable them to pay these debts. Their so-called degrees are virtually worthless in the open market

    • BenX says:

      Exactly. And force banks to hold the loans without taxpayer insurance. In the 70s, the poor student’s plan was get the diploma and a job to pay off the loans. If that didn’t work, then bankruptcy with nothing to lose was door #2.

  10. nick kelly says:

    Goldman has offered 8 cents per dollar for these debts subject to the govt financing a network of ‘secure residential campuses’ where defaulters will reside.

    • davie says:

      Didn’t Charles Dickens write several books about these “secure residential campuses?” They sound familiar.
      It’s been so long, and unfortunately, I didn’t do much of the required reading when I was in University. I was too busy going to music festivals, buying designer jeans, and upgrading my iphone on the taxpayer’s dime.

  11. Rowen says:

    There’s the macro issue of student loans”morality” and the macro issue of choking a generation of americans.

    The Japanification coming to America isn’t just about ZIRP; it’s also the Lost Decade or Lost Generation.

    Got Popcorn?

  12. ZeroBrain says:

    “If the government REALLY wants to do something about the soaring cost of education, and that’s the real problem here, it’s to reduce the amount that students can borrow”.

    YES. That would be a solution! That’s also how we know we can write it off as the action that will be taken. So my question is: what government action is likely? Do you think blanket forgiveness would piss off enough taxpayers that it doesn’t come to pass?

    Also, Obama’s loan “forgiveness” (100% loan discharge/taxpayer-flogging) exists for a number of preferred groups, especially those who received “Perkins Loans” – a program that has been terminated under Trump. Those groups are as follows:
    –Public sector employees (changed under Trump to 15 or 30 years for undergraduate and graduate debt respectively)
    –Police, firefighters, first responders
    Talk about buying votes! F*ck.

    • Kent says:

      “Also, Obama’s loan “forgiveness” (100% loan discharge/taxpayer-flogging)”

      Wow! How much money did you lose from the taxpayer-flogging?

      • ZeroBrain says:

        My portion of the corresponding debt and currency debasement that ensues.

      • ZeroBrain says:

        PS – and even if I lose NOTHING, it’s unfair and I stand against it on principle, because OTHERS lose out unfairly.

        • NBay says:

          Kent asked a reasonable question, I would think.

          And so you lost nothing, but still stand against it on “principle” and “fairness to others”? Dollar debasement would affect everyone residing in the USA who owned or was owed something valued in dollars equally (in owned/owed dollar % terms), I would think, unless they own something presently not valued in “the coin of the realm”. Or thought they did, anyway.
          To me, as Wolf presented it, it looks like a variation on the liar/ninja/securitizing/rating “industry” that caused the financial crises, only not as big, but obviously making a lot of money for some people, and evidently “legally”, at least it was last time, as nobody went to jail over it.
          And as someone mentioned above, if debts are forgiven, that will certainly end that game.
          In light of that, I wonder what will be tried next, not to mention what is the “principle” and who are the “others” you are so concerned about?
          Come to think of it, what is “fair”?

        • ZeroBrain says:

          This train of thought is mind-bendingly illogical and I’m not even going to try to muster a counterargument. It amounts to “let’s not try to have fairness and JUST GIVE ME WHAT I WANT”

  13. Gordo says:

    Like Trincria above, I was a University Professor for over 20 years. In my case I moved from working in Research Institutes directly to University Professor. The transition was startling: from an intensive, challenging, hard-working environment into a paid retirement home for the educated. The pay wasn’t bad but tiny in comparison to the senior administrators; generally a self-serving clique of poor academics who could not cope with research but paid each other handsomely to do little or no work.

    I too am now am happily retired. One unseen benefit of University academia is that the move from work to retirement is barely noticeable.

    • Gold is says:

      “…the move from work to retirement is barely noticeable….”

      Exactly. And that’s another reason why many kids leave college ignorant & virtually unemployable.

      You must be so proud….

      • Gordo says:

        I only taught post-docs at research level: no”teaching” per se. I was commenting about the system and especially the appalling bureaucracy. Both greedy and useless.

        Many academics in lower positions are quite dedicated to their students but receive no encouragement.

        But the work ethic at Universities does not even approach that of dedicated Research Institutes, at least in medical research.

        • Gordo says:

          ps Gold is

          You seem to be lacking in a sense of humour, or to be an aggrieved, failed student. I suspect the latter.

    • Zantetsu says:

      “A self-serving clique of poor academics who could not cope with research but paid each other handsomely to do little or no work”.

      This is very similar to how I feel about the execs at most companies, mine included. Golden parachutes, massive failures being rewarded by C-Suite jobs at other companies …

      Really I think the same situation exists in all aspects of human organization – in both public and private sector, there is PLENTY of back-scratching going on.

  14. ZeroBrain says:

    One small nitpick – Andrew Yang did in fact declare that he would cut federal funding of student loan programs and universities. He said there’s a lot of administrative fat and they’re just going to have to make it work with less money. But he won’t get the nomination.

  15. Michael Gorback says:

    Student loans are money printing wearing a wig and fake mustache.

    • Old-school says:

      I was an engineer at a manufacturing plant and worked plenty hard, but some of the line workers worked so hard and were so dedicated to serving the customer. Universities are the favored child and manufacturing is the red headed step child that is pulling the wagon.

  16. Steppenwolf says:

    Wolf, you are selective in your application of the fairness argument. Agree with the notion that the mistake was and is of the gov allowing this predatory practice in the first place and for so long and even underwriting it. Why does the gov make mistakes tho? Are those honest mistakes? Or the result of corruption, influence buying and policy-buying rackets? Once the damage is done the fairness argument can be selectively applied by any party for any purpose. How about correcting the unfairness of exorbitant cost inflation of higher ed? Can one honestly make the argument that college is a luxury expense and a choice rather than some sort of necessity like housing with which generations can be blackmailed effectively? If you’re argument hinges on a narrow and selective view of fairness then maybe this just means that the issue is more complicated than that and you need to think again. Also disagree with the vote buying claim, which reveals a particular mindset and, more charitably, assumptions about human phyche and behavior, which is invariably unfounded. I for one have been educated in multiple countries in Europe free of charge, even got paid through PhD etc. and am appalled by the notion that 1) education is costly and 2) students should be paying for it and am an avid supporter of the elimination of tuition, of private edu institutions altogether and of the elimination of debts. Let’s not forget that the gov also has the power to correct a wrong by clawing the spoils back. Let those who have been benefiting front this disastrous and unconscionable scheme lose their shirt.

    • normansdog says:


    • Jack says:

      Your PHD have been a waste of European’s tax payer money.

      Tertiary Education is a privilege Not a Right. and the majority of the end product ( graduates) don’t contribute zilch to the common good. So No, not everyone needs a tertiary education to become a proper productive person who enhances society at large.

      Your European view is what is killing Europe now . First Economically, then ultimately politically.

      • Steppenwolf says:

        I very much agree that not everyone needs a tertiary education to become productive nor to enhance society at large. This is obvious as stated. I would caution from using productivity as a measure of anything other than productivity tho. The rest I profoundly disagree with.

      • Steppenwolf says:

        Just so that we’re clear, are you saying that tuition-free public higher education is “what’s killing Europe”? Is that what you are saying, Jack?

        • Wisdom Seeker says:

          There’s no such thing as “free”, it’s just how the costs are shifted and hidden from the beneficiary.

          It’s a bedrock result in economics that any resource offered “free” will be abused by the recipients.

          To avoid waste everyone’s incentives have to be properly aligned, and that includes paying appropriately for what one receives.

          This has a beneficial side-effect of also limiting corruption.

    • T.J., not the real T.J. says:

      Most college degrees are a luxury. Trades like plumbing aren’t. Fancy trades, like nursing, accounting, and cardio-thoracic surgeons aren’t. Mine isn’t.
      English is. Lit is, gender studies is. I suspect your PhD is, too. Even if it is economics. If not you’d know well that public financing of debt leads to MUCH more debt. The people benefitting from college bloat have nonsense degrees with no applicable trade at the end of it.

    • MCH says:

      Human behavior is what drives everything.

      Simple point, if someone is just given something, they don’t tend to appreciate it as much as if they had to work for it. This is part of the problem with massive government giveaways, it becomes entitlement. I do recall however that Europe or at least parts of it does have a model that seem to work, which is some type of exam around the end of high school which is then used to screen out the losers from higher education.

      That type of meritocracy might work, but it also depends on the incentives involved. It’s these types of behavioral dynamics that might be a useful to change the education system, otherwise, we all just keep spinning the wheels until it comes off. Then some poor saps in some future generation gets all the hard work associated with putting the world right again.

  17. Carrie says:

    Instead of forgiveness, why not just reduce interest payments to 1%? Why must anyone be making money off these kids?

    And then the taxpayer gets stuck if the student defaults?!?

    Sounds like a win-win for the ELITES… again….

    • Wolf Richter says:


      Default rates on these loans are ginormous. They make subprime credit-card losses look tame. The government is not making money off these loans. Even under the best circumstances, these student loans are a money-losing deal for the government.

      • chillbro says:

        Wolf, I am pretty sure the government was making money on these loans until recently. In fact, there were reports from 2013 that they were gonna make 50 billion that year. However, that amount was closer to 1 billion in 2016. I believe that 2016 was the last year gov turned a profit, hence why this is an issue now. The projections look terrible going forward though.

  18. Steppenwolf says:

    Arguments designed to divide the populace along narrow interests serve to facilitate their continued shafting by repeatedly rigging the system.

    I strongly disagree with the transactional framing of education as a form of service and personal consumption for the benefit of higher earning positions. That is not what education is about and whatever you are thinking of in that context isn’t education. Education is how society perpetuates itself and grows through generations and how humanity can a- and con-spire to lift the awareness of each individual as well as of the collective.

    Would anyone rather live in a society of uneducated or less educated people?

    If not, should all not be asked to contribute to the education of all? Ideally a whole lot more than currently done.

    And then we haven’t even touched on the folly of valuing human accomplishment in terms of economic metrics. Of conflating learning with earning. I get that this is an economics blog, but is this even an economic issue?

    I’d argue that a big part of the problem _is_ that education is being framed and addressed as an economic issue. There is this overhang now from past mistakes. So let’s unwind that. But going forward I oppose thinking about this from a point of view of economics.

    While at it, let us first discuss the discipline of economics as a field of study – or is it – before invoking it to debate other things. Plenty of opportunities here for juicy grants!

    • Jack says:

      “Would anyone rather live in a society of uneducated or less educated people?”

      I am on the floor! Yup you’ve floored me!

      So you think a tertiary education is what makes a society more ( educated)?!


      the world around us is strewn with” highly educated “ people with fancy pieces of paper that tells everyone else that they’ve graduated from such and such University, and who are clueless of real life !

      By the same token there are multitudes of people with barely high school degree and run corporations, and manage businesses and people and keep them employed!!!

      So No again, you haven’t convinced me!

      and remember that life is the real educator Not a piece of paper!

      This is why the West is losing the skills and the knowledge of building things , because everyone wants to be employed as a manager at the outset of their employment life! What a joke

      • Paulo says:

        Jack beat me to it!

        regarding: “Would anyone rather live in a society of uneducated or less educated people”?

        Confession: I am a carpenter/pilot/welder/fish techician etc etc etc who is presently spending about 30 hours per week working on an Advanced Amateur Radio ticket (Ham) at age 64. This mindset is called “Lifelong learning” and has dick all to do with “Edumacation”. Oh yeah, I also have a couple of degrees including an MA on top of trade certs. Without a doubt….and I say this with all due respect, the least educated people I have ever run into were at University. A paper degree means absoultely nothing in the real world. Nothing, except when it aligns with a degree granting university and poitical system that works as racket.

        My aged Father-in-law (God bless him) is from working class Manchester England. Born in a Council Flat, literally hearthside…just prior to WW2, he obtained grade 7 before the War broke out. And that was that. He became a printer…by trade, and emigrated out to Canada in the ’50s. For the rest of his life he felt the distinct stigma of the educated money class on his back, from the swagger stick “Officer” in the R Navy (while doing his compulsary service) to the sound of his own voice with its Manchester roots; an accent that forever labeled him as ‘uneducated’, un-monied, unconnected, and somehow lesser in the scheme of things.

        This same man, throughout his life, taught himself many things; to read Egyptian Hierogliphics, play the shakuhachi (Japanese flute), became an accomplished painter, and still sculpts in stone at age 89, (failing heart and all). Grade 7, working class tradesman, and uneducated.

        The only reason why universities have not yet been officially downgraded to obsolete in this marvelous age of free and easily obtainable information is the fact that they control degree certifications and poitical influence. It’s a freakin’ racket, pure a simple….a class racket with a stamped seal paper accent to denote who and what you are.

        I live rural, and when new arrivals move in ‘putting on airs’ they are greeted politely by residents but not really acknowledged or accepted unless they are capable of actually doing something other than name dropping ‘what they used to do’, or where they went to school. It’s like they don’t exist, much like it is for the worker past invited to pick up his pay at the kitchen door. (Which is what happened to me, once).

        The great melting pot? Hah. It’s as class ridden as any other society, and why my tax dollars should be skimmed to support this racket is beyond me? Oh yeah, I paid for my post secondary education out of savings…no bank of mom and dad, and no student loans. Why should I pay for someone else’s schooing beyond high school?

        Thanks for the rant. regards

        • RD Blakeslee says:

          Similar life here, but older than Paulo now and coping differently.

          First, an observation: Wolf’s solution, a cut in government spending is generally applicable to many government programs but, as Wolf points out, it will never happen. Pols have to run for office exploiting a financially “entitled” and illiterate major portion of the populace.

          So, my strategy is avoidance of the skinning.

          Opt out of money as far as is reasonable, earn as little TAXABLE income as possible and devise ways to produce the stuff you need from your own land.

        • DawnsEarlyLight says:

          ‘fish technician’, lol

        • sc7 says:

          You can’t do any type of real science, engineering, medicine, law, or advanced business by the “school of hard knocks”. Sorry, but higher education is still very much necessary and valuable. It just shouldn’t be surrounded by luxury living, $100m gyms, etc…

          Your ignorant views speak volumes to why rural America is in perpetual decline.

    • Wolf Richter says:


      It seems, you didn’t get the message of my podcast. The “real problem here,” as I said in the podcast, is that higher education in the US is ridiculously expensive because the University-Corporate-Financial Complex is sucking the bejesus out of it for its own profits and gains. Education shouldn’t be and doesn’t need to be that expensive.

      I suggested some solutions to make it cheaper. Among other things, I said that universities should go back to the drawing board, sell some of their huge properties, including land, buildings, and stadiums, and “focus on offering the best education at the lowest price.”

      But education in the US has become a financial rip-off.

      • Steppenwolf says:

        There is some misunderstanding still.

        For one, having been granted attendance to school does not mean you don’t have to work to learn. If you ever tried to learn anything, you’d know that. It is super hard work. Because you do have to change yourself, how you think, how you perceive things. I’d love to talk more about this but don’t want to digress.

        Second, knowledge cannot be owned. Makes it kinda meaningless to try to control access to it by whatever means. Conversely, the beauty of education is that no one can save another the work that needs to go into learning. So education is by it’s nature based on proof of work principle. You can’t buy it, sell it, forge it, fake it. It’s the original cryptocurrency of the universe. And people have been working hard at mining it since times untold.

        Third and related point, as I’ve attempted to point out, the education of individuals is in society’s best interest, which makes public funding education from pre-K through grad school, cradle to grave really, a no-brainer.

        All universities’ doors should be open. The only limiting factor on access to physical space, equipment and staff should be proof of work via demonstrable knowledge in the relevant field.

        I love Paulo’s testimony. I feel that it only reinforces my points. And I share some of his reservations about the university system. Especially in the UK. Don’t even get me started.

      • Steppenwolf says:

        Thanks, Wolf. I did not miss those points, only chose to respond to the one aspect of your thesis that I found problematic: as concerns the unfairness of cancelling student debt. That is clearly not a sound argument, though I appreciate the concern and sentiment and the question. The other views you’ve just highlighted again, I generally espouse. Having spent fifteen years in academia, I see no reason why education should be expensive. In fact, it wasn’t here either, nor is in other parts of the world. One can probably argue that education is, if one wishes to do a cost-value analysis of it, one of the best investments a society can make. Then again, I don’t think that’s the most appropriate way to think about it. Regards.

        • Old-school says:

          We all tend to think what we do is important. If you don’t use prices to determine what is important, then you have to come up with a better mechanism which usually is more corrupt than the price mechanism.

          If you say something is not subject to a price mechanism then it grows until society says we can’t afford to put more resources into that endeavor and rationing still takes place, but it is then done by political system.

      • Petunia says:

        Are you suggesting they get rid of the football team, the $500K a year coaches, and the stadium that seats 10X the number of students? If they do this, you realize, I will have nothing to read in the local newspaper.

        • Stephen says:

          the 500K football coach? That’s at a small school. The majors football schools are all well into 7 figures. Nick and Dabo are pretty much around 8M with bonus.

        • 728huey says:

          Actually, a survey was done a couple of years ago about the highest paid state employee in all 50 states, and in 43 of those states the highest paid state employee was either the head football coach of the major state university (think Nick Saban or Dabo Sweeney) or basketball coach (think John Calipari or Bill Self). I would also add that it’s the free flow of television money to these sports programs has caused much of the inflation in all public university budgets which is causing the soaring rise in the cost of tuition.

    • Setarcos says:

      Steppenwolf, “Would anyone rather live in a society of uneducated or less educated people?

      You have actually described the current situation in your question quite well. If we look at outcomes, the answer must be yes.

      I have recently observed “education” at a top university first hand. It is unconscionable. One class helps students “discover their true sexual identity”. Course content acknowledges that some “exploration may be uncomfortable”. The professor suggested tequilla as a way to “take the edge off” any physical discomfort. Forcing taxpayers to pay for this?

      And with regards to paying for all, this describes public K-12. Any person ever charged with achieving positive outcomes in their profession is appalled by public K-12. My educator friends and family are encouraged by the results of Charter schools, which are relentlessly attacked by teacher unions, some pol’s, etc.

    • T.J., not the real tj says:


      I thank you for your contribution to this thread. It is important. Please take my comments in their proper context.

      You’re clearly well educated. I have no idea if your education pays even your bills. Either way I have no interest in subsidizing your training, or anyone else’s beyond my family. I will pay the entire bill for my 3 children if I approve of their studies and their efforts toward those professions. I have committed a fair amount to nieces and nephews. If my children or nieces/nephews choose nonsense I won’t subsidize it a penny. Your suggestion is tyranny.

    • Wisdom Seeker says:

      RE “Would anyone rather live in a society of uneducated or less educated people?”

      Depends on what you mean by “educated”. For many people, the real education only begins after they leave the academic system.

      Large swathes of the course syllabi in many universities today are so far from the classic notion of “education” that faculty from prior to 1950 would be rolling over in their graves if they knew.

  19. Barry says:

    Ron Paul a Mises Acolyte said the Fed should just take it on its balance sheet. Just like the bank bailouts. No inflation stays in the other economy. We had a GI bill and provided education and training to 16 million men and women. For every dollar spent there was 10 returned. We could easily offer this for students. Many countries have subsidies or free education.Like in Germany, right Wolf. The CB is not fiscally constrained and the treasury is artificially constrained. We could fund productive things like education and health care , infrastructure and more. Richard Werner a German economist who coined the phrase QE says as long as money created by commercial banks is for production then you won’t have inflation. Unfortunately most money created by commercial banks is for speculation already owned assets like stocks and RE.

    • Jack says:

      “Ron Paul a Mises Acolyte said the Fed should just take it on its balance sheet. Just like the bank bailouts.”

      Barry where did you see this?!

      You’ll need to provide a link or you’re putting words in the Man’s mouth!!

      And that is what Mr twitterati refers to as ( FAKE NEWS) . so be honest when reporting on someone else’s views next time.

    • Wolf Richter says:


      By forgiving these student loans or putting them on the Fed’s balance sheet and letting them be forgiven there, you’re enabling the University-Corporate-Financial Complex to continue sucking the bejesus out of education for profits and gains.

      The US has turned higher education into a financial rip-off. A solution is to turn off the loan spigot and force universities to return to their roots. Back in the days of the GI bill, college was cheap. Now it’s horrendously expensive. And these student loans have enabled that. They’re just a money-transfer mechanism from the taxpayer to the University-Corporate-Financial Complex.

      Education shouldn’t be that expensive. I suggested some solutions to make it cheaper. Among other things, I said that universities should go back to the drawing board, sell some of their huge properties, including land, buildings, and stadiums, and “focus on offering the best education at the lowest price.

      • MCH says:

        And if they do forgive the current student loans. I want my loans from two and a half decades ago refunded with interest.

        After all, if you have to be fair, you need to be fair to everyone. Especially to those that followed the rules before it got changed.

        So, I’m going to demand a rider on whatever legislation that gets put through on student loan forgiveness that those who paid off the loans get their money back with interest. Then we can have all of the generations, Xers, the Boomers, and the Millennials who paid off their loan demand the same.

        Remember, if we have to crush the Federal government, it should be done by everyone. It’s FAIR.

      • Barry says:

        I totally agree with all you solutions their well thought and make sense. The gov could use taxing such a Complex and has Steve Keen has said we need a debt jubilee at this point. The gov has the power to even do a debt equity swap for said debt. When you look at what isn’t taxed or severely under taxed by looking at BIS red book you’ll find 5 quadrillion dollars and if just .2 percent was taxed we could take the dollars out of circulation to do such a swap.

        • Wolf Richter says:


          For me, any “debt jubilee” is the third rail. Any politician or “economist” proposing it has lost it with me forever.

      • sc7 says:

        Wolf, the only thing I think you are missing is the research aspect. It would be a shame for the US to lose the leadership our universities have around the world in terms of the faculty research done at the top 100 or so schools. Focusing solely on lowest-cost education could kill a lot of that.

        Focusing solely on lower cost is how you get diploma mills with a cookie cutter curriculum churning out students like a factory. I think research and individualism are important, but it’s the luxury living and other distractions that need to be jettisoned.

  20. David Hall says:

    Student loan defaults (270 days past due) are about 11% of student loans and rising. I suppose they may qualify for subprime auto loans. Am not sure if they qualify for subprime mortgages after the 2007-2012 crash.

    Parents who cosigned student loans for their children have been retiring in debt.

    I recall a story I read about 40 years ago. A PhD philosophy grad had finally found work. He was a day laborer shoveling snow at the New England Patriots football stadium. He should have become an electrician or a physician’s assistant.

    I do not believe Elizabeth Warren can come up with the funds to forgive hundreds of billions of dollars of student debts. If she does, it might make people want to stay in college for the rest of their lives with free room and board only to see all that debt cancelled.

    The states used to subsidize state universities and make entrance requirements competitive to allow only the higher achieving students in. People did not want their state taxes to go up, so there are fewer subsidies today.

    • sc7 says:

      The majority of defaulters went to for-profit schools or did not finish their education.

      Of those that graduated from accredited institutions, the default rates are markedly lower.

      Public perception has all but solved the for profit issue. I’d like to see schools held accountable for drop-outs. Often times a little intervention from the school could help keep that person on track, but they currently have very little incentive to do so.

      • DawnsEarlyLight says:

        That is a great observation!

        Another reason is many middle income families do not qualify for financial aid. A good number of lower income families that do qualify, are unprepared for what awaits them during and after college.

  21. mijj says:

    the obvious solution is to promise to forgive the debts and then not do it.

  22. alex in San Jose AKA Digital Detroit says:

    Make student loans discharge-able through bankruptcy

    Get rid of NCAA sports – entirely. No more football, no more archery, shit-can the whole thing. Professional sports and college make no more sense as a combination than scrambled eggs and spackle.

    Make the rich actually pay taxes. Send a few of ’em to prison and no, not country-club prison, someplace like prison in Louisiana, and maybe hang a few who won’t play. This will more than pay for effectively free tuition for those who can “test in”. If you’re dumb as dirt and still want to go to college, have your parents pay for it. But make it so the smart and talented can go to college regardless of race or class – gee, like the USSR! I like this!

    Colleges have huge, let’s say enormous, slush funds. Those multi-million dollars for salaries for football coaches we’ve just sent to the gulag had to come from somewhere. That money can pay professors, professors’ assistants, etc. Good wages and a Union, and affordable, pretty much free, tuition for the kids who belong there. Again gee it’s sounding like the USSR isn’t it?

    Hold a “jubilee” where all student loan debt after date X, is null and void. Just put a hard stop to the whole thing. Before the “everyone who’s not a total dunce must go to college” push, we in the US had trade schools that were good, and respected. There were trade schools for every trade under the sun. Hm, seems the USSR was big on “Vo-Tech” too.

  23. Kenny Logouts says:

    Are any of these students forced into taking this debt under the terms and conditions applied?

    Are they meant to be intelligent and capable of understanding the ramifications of investing in their future?

    In the UK I’ve witnessed repeated socialisation if the debt, and privatisation of the wealth.

    What will happen in the USA? The same.

    To think the USA fought a decades long hot/cold war “against communism”, at brutal costs to society.
    And yet communism (assuming all communism arrives at the crony kind via whatever means) as a way of thinking and acting has infected the USA any way.

    I don’t normally lol. But. Lol.

    • Harrold says:

      Student loans are the only debt people under age 18 can be legally held responsible for.

    • alex in San Jose AKA Digital Detroit says:

      Traditionally, you went to college – free and at least ideally regardless of race or class – if you tested in. Then, if you were an imbecile, but your parents had money, they’d send you to college, too. But not on The People’s dime.

      Is crony communism any better than crony capitalism? Oligarchy A vs. Oligarchy B.

  24. Endeavor says:

    Here in the Midwest, I would prefer forgiving auto leases on domestic BUILT vehicles.. Hard working people would benefit and not the meddlesome world improvers. Won’t need tariffs and used cars would cost at most a song. Wake me when this is adopted!

  25. Unamused says:

    Okay, I’ll bite.

    Since the US student loan debacle is yet another result of financialisation, try clawing the money back from those who have benefited from financialisation.

    If you’re going to insist on trying to solve the problem, start there.

    The US student loan debacle is properly seen not as an isolated disease but as only one manifestation of a terminal cancer which has metastasized throughout the world economy. To be sure, the financial structure of the US university system is in dire need of reform, but it is only one of many which has been afflicted by financialisation in particular and by corporatist corruption in general. The waste in the US university system is peanuts compared to the waste generated in every other system touched by the Financial Industrial Complex for its own power and profit, and by now that is every major institution you can name.

    Reforming only one afflicted system like higher education wouldn’t help much, therefore, and wouldn’t be possible in any case without reforming the FIC itself.

    Consider, for a moment, an observation from the 19th century:

    “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”

    – John Emerich Edward Dalberg-Acton, 1st Baron Acton

    Next, come forward a hundred years, and consider that battle has long since been lost:

    “…[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole . . .”

    Tragedy and Hope: A History of the World in Our Time, Carroll Quigley

    Careful readers here, if they are honest, will know that goal has been accomplished.

    What to Do About the Student-Loan Fiasco?

    It doesn’t matter. Given the state of things, there’s really nothing you can do because the underlying problem has advanced so far there is no longer any possibility of any solution. The global order as such is both wholly unsustainable and unassailable, and therefore must and will collapse. It’s going to be a mess, and there isn’t going to be any way to clean it up. That’s why the hyperrich are looking for ways to save themselves, when all they can really do is delay their own demise. Terminal, I said.

    The future isn’t what it used to be. And never will be again.

    For those of you who manage to survive, we’ll see you on the other side, and as for the rest, well, I’m going to miss you guys.

  26. arihalli says:

    I think what you say makes a great deal of sense.

    Yet, the upshot of stricter loan requirements may leave us with a 2-tier system of college enrollment where only the wealthy get to go to college, i fear.

    The assumption that you make, is that colleges will begin to lower prices, with lower enrollment, i hope that would work. But what if it doesn’t? What if the enormously wealthy still maintain payments to college to subsidize the monumental costs? Even in the transition period, there may be many kids who will be deprived of a college education.

    Also, college is an investment in the future of the USA. We need graduates to supply innovation and new technologies to compete against China, etc. Perhaps, free education, would not be a bad idea if looked at as an INVESTMENT in Americas’ future?

    • GirlInOC says:

      “stricter loan requirements may leave us with a 2-tier system of college enrollment where only the wealthy get to go to college, I fear.”

      That was my initial thought too. Prices may eventually come down via Wolf’s propositions, but in the meanwhile, you just effectively cut out the poorest and those most in need of the degree.

      But I wonder if we backstop that with free community college if that would help? And affordable housing? (ha! *that* pesky problem seems to crop up quite a bit)

      • joe says:

        What are endowments for?

      • Setarcos says:

        The poor are already effectively locked out of higher education. They are forced to go to failing K-12 schools. Watch what happens when someone says they should have the ability to choose to go to a primary school that isn’t failing – teacher unions and a host of other special interests always take them to the woodshed.

        We have volunteered in these failing primary schools. What we have observed is often beyond shocking. Denying these kids a choice is exponentially more tragic than the federal student loan system problems.

  27. QQQBall says:

    Country is broken. People now argue that car loans should be paid off by their neighbors while other people scream that student loans should be paid-off by others. Lets just punish the prudent. If this is the greatest country on earth, we are in deep doo doo. The USA is dysfunctional

  28. Brant Lee says:

    I believe it was 60 minutes that run a piece years ago about sharks buying small federally accredited colleges to fleece the student loan program. It spread to all colleges and years later, you guessed it, Congress hasn’t done anything to stop it. Just like healthcare, when the government gets involved, politicians friends get rich.

    • Harrold says:

      Trump University?

      • alex in San Jose AKA Digital Detroit says:

        There are any number of private diploma mills that take people who’d have trouble passing the GED test and encourage ’em to borrow to the hilt, pay a huge tuition plus student housing, meal plans, etc., because the student, and the gov’t are left holding the bag. Trump U. was but one of many.

  29. breamrod says:

    you know there’s plenty of blame to go around with this. Bad advice from high school counselors, parents( oh you must go to college). Like Wolf said it’s really just corporate America taking advantage of ( with government help of course) students and dumb parents. Make these snowflakes work for a year out of high school to maybe get them to think and learn about the real world. We might just be seeing a little bit of this now I hope. what to do with the current debt? How about a chapter 13 bankruptcy where a court decides what you can pay for say 7 years and then the rest is discharged.

  30. Just Some Random Guy says:

    2 points

    1. It’s not a student loan crisis, it’s a college tuition crisis. The problem is $60K tuition, not the loan needed to pay tuition.

    2. I’m old school and have the weird notion that if you borrow money, you should pay it back, not rely on the govt to do it for you.

    • Setarcos says:


      Agreed on point 2. Education should involve an understanding of contracts. Without enforceable contracts, chaos results.

      On point 1, the availability of the fed student loans is what had lead to ridiculous tuition inflation. If memory serves, the NY Fed said something like a 56 cent increase in tuition for every $1 in new loans. The study can be researched further.

      • alex in San Jose AKA Digital Detroit says:

        I paid back my loans. College was a huge scam that held my lifetime earnings down and it’s time and money I’ll never get back but I did pay the loans in full.

        And I’m all for all college loans being forgiven. Hold a Jubilee, full stop.

  31. joe says:

    All the discussions and comments on this topic are pathetic. If you assume the $1.6T debt is a problem, the first thing you have to do is stop giving any new loans.
    Wolf is right about one thing: add the UIC group to the MIC and the HIC and the BIC of the blended corporate/government crony capitalist government we currently have.

  32. Mark says:

    “Can you show me concrete evidence, not speculation or conspiracy theories, that the fed is buying shares of companies en masse?”

    The criminal privately owned Fed is NEVER AUDITED . How do you plan to determine “concrete evidence” of the corrupt manipulation, when they are above audit ?

    Why do you think they refuse to be audited ?

  33. Stephen says:

    Somewhere lost in this argument is that as generous financing of education is extended, the institutions become ever more so elaborate! I returned to my undergraduate alma mater (Duke University) after more then 25 years, and I had to seriously ask myself if I was on the same campus! Not that I don’t expect things to change over time, but the building was absolutely phenomenal with perks that students in the 70’s could only dream of in a wild slumber. But I digress, 100% funding of college education will result in the same phenomenon as we have in the US Defense industries. Tremendously bloated prices for mediocre or even non-functioning weapon systems. If you think the cost of education is high now, wait to you make it ‘free’! Caveat: Socialism does not work.

    • Seen it all before, Bob says:

      I’m not a Tea Party member, but what is needed now is a Tea Party measure for Public Universities.

      In 1978, the local Tea Party in CA promoted Prop 13. Prop 13 rolled back Property taxes to 2 years before and capped the yearly increases to 2% to prevent government bloat.

      The State University system is in dire need of this. Roll back tuition to 2016 and then cap any tuition increase.
      Students need a safe place to live and a good education. They don’t need gigantic stadiums and ginormous Rec centers. This is a Tea Party approach to a Democrat solution.

      As a side note, when I went to a State University in the 1980’s, I could pay my entire year tuition working a summer minimum wage job. You can’t do that today. Either minimum wage has to go up drastically or tuition has to go down.

    • Zantetsu says:

      I had the same experience. I returned to my alma mater (Carnegie Mellon) about 20 years after graduation (I graduated in 1994) and was stunned by the number of new buildings and the sheer level of luxury provided to new students. It is quite clear that this is where all of that increased tuition went.

      It’s my understanding that it was a bit of a necessity driven by helicopter parents who evaluated schools based on the amenities they provided. If a university still had dank concrete buildings from the 1960’s like we used when I was at CMU, they would fail to attract the students of parents who wanted their kids to have a club med experience in college.

  34. Setarcos says:

    Wolf, you don’t blame politicians for appealing to our lowest and most base instincts? When someone gets elected via nonsense, they also govern that way.

    “What the statesman is most anxious to produce is a certain moral character in his fellow citizens, namely a disposition to virtue and the performance of virtuous actions.” Aristotle

    This is a circular and self-reinforcing process. Admittedly, Aristotle has been out of fashion and the result is obviously another circular and self-reinforcing process commonly referred to as a “race to the bottom.”

  35. Mark_2 says:

    Students have been loaded down with expenses since the 1800s (cite “Walden”) because they’re(as a whole) likely to have decent paying jobs and the discipline to pay off debt…eventually. Maybe they’ve been gouged in some cases need a PERCENTAGE of their debt dismissed.
    Complete dismissal of their debt teaches a terrible lesson and is unfair to tax payers.

    Complete dismissal of student debt belongs in the same bucket as open borders and federal minimum wage (same for big cities and small). Maybe these positions are useful negotiating but I would hope clearly unworkable as policy.

  36. Chester Hazlewood says:

    Tell me, how are we going to compete in a world where other nations like China have free education? How are we going to make our exports as inexpensive as theirs?

    • Kent says:

      There is no “we”. There are the people who make monthly payments on their debt, and those who receive those monthly payments. Those who receive those monthly payments could care less if those who make the payments are competitive. Don’t ever forget that.

      There’s a whole world to put in debt.

      • Chester Hazlewood says:

        Yeah, rich people just want to sit on their lazy worthless asses and collect debt payments.

        • T.J., no the real tj says:

          We loan you the money you need to build your dreams. You’re welcome. I got up @ 4:30 today, how about you, Chet?

        • Chester Hazlewood says:

          Started my shift at 4:30. It’s laughable that we have to come to you worthless paper pushers to get access to our dreams.

        • Kent says:

          Not true. It requires considerable effort to purchase for profit colleges, come up with the sloganeering to get 18 year olds to sign away their lives, and bribe Congress to backstop it all.

          Not to mention schemes to get credit rating agencies to rate MBS from no-doc loans in the ghetto as AAA, buy and drive once proud companies into the dirt like Sears and ToysRUs, offshore American manufacturing, and dozens of other scams that keep the rich getting richer. But hard work pays off!

    • Just Some Random Guy says:

      It may be “free”. But compare a university dorm in China with one here. We don’t have dorms anymore, we have 5 star luxury hotels. Even in Europe, dorms are no frills hostel type living quarters. No rock climbing walls or pools or 80″ TVs to be found.

      And you should know nothing in the world is free.

    • DawnsEarlyLight says:

      Tell me why the majority of students in many US universities are Asians?

      • IdahoPotato says:

        As an Asian (Indian) let me tell you this: middle and lower middle class Asian parents save up all thier lives for their childrens’ education. Most Asian kids get financial help from their parents.

        Many Asian students in the U.S. are either from wealthy families, or have parents who are in debt to their eyeballs to educate their children.

        Some are lucky to get scholarships. Many Asians are expected to support thier parents after they get jobs ‘cos the parents have invested everything for thier education. They send monthly remittances to their parents until their parents are no more.

        Now, the smartest kids in India try to learn German and get into German universities, ‘cos higher education in Germany is free. The standard of education there is excellent.

        I was lucky to get scholarships to the UK for my post-graduate degrees. The cost and quality of U.S. higher education are beginning to deter those except the wealthiest who can afford it and/or are seeking U.S. citizenship (especially Chinese students).

        Moreover, a couple of the top universities in China are slated to become the best in the world over the next decade. That will stem the tide even further.

        • DawnsEarlyLight says:

          Good enough, that’s the road many families take. The point was it’s not education, but far lower wages that make us noncompetitive with China or India.

          The high ratio of external Asian students still stands, and I would hope that there are great universities elsewhere.

      • alex in San Jose AKA Digital Detroit says:

        Because Asian parents will generally bust their balls (or ovaries) to get their kids the best start in life they can. They’ll wash dishes, or cars, or work as janitors, anything. They’ll rent a closet of an apartment and literally sleep in the closet so their kids have the bed. They’ll tutor, as well as they can, their kids. They actually care if the kid comes home with an “A” or a “B” etc.

        Compare and contrast the typical American upbringing. You’re out at age 18 to sink or swim. Parents don’t care too much if you bring home A’s or C’s. What matters is, can you play football, and did you beat up the kid with glasses this week?

        There’s just no contest. It’s literally civilized people vs. barbarians.

        • DawnsEarlyLight says:

          It’s really about keeping wages low in the US. Regardless how you feel about the civilized verses the barbarians, the system doesn’t give a F about either. Global Corporate Magic trumps Mom and Pop.

        • Wisdom Seeker says:

          I agree, the Asian system is barbaric. ;)

          Enslaving children to the desires of the parents is no way to raise healthy and happy children. The US learned that lesson in the 1950s.

          There is more to life, and to be successful in life, than just working all the time and getting As whenever possible.

          And the “typical” American upbringing is not as loose as you make it out to be.

          P.S. There are plenty of Asian kids who get Bs and whose lives are practically in danger as a result.

    • Mark_2 says:

      There’s a lot of wrong with our society but accepting loan money, spending it on something you benefit from (and beer) then expecting it the entire debt to cancelled it just more wrong.

  37. IslandTeal says:

    The loan issue is a big mess. Having a reasonable solution for that does not solve the bigger problem of the financial waste by administrators of educational institutions. As was pointed out above cut the budgets and then recut. Start with the administration. School districts have lost track of what they are really responsible for. It is not building new schools and administration buildings. Then again this also applies to most of the public sector.

  38. KGC says:

    I think that, instead of loan forgiveness, there should be a cap on the amount of interest any student loan can be charged, and would suggest 1 % below prime as a way of subsidizing education. In this manner the business is there, provided you can make money at that rate (and banks seem to be doing OK at that). But along with that, I’d cap the amount that any student could borrow, which would make it more of a priority to choose a career path and move towards it.

    The education system in America has flaws, but it works. If it didn’t we’d have a lot fewer students from countries with “free” schooling (China, the EU, etc…). But we’ve become so dependent on financial services to run the economy we’re robbing our future generations.

    • Mark_2 says:

      @KGC “I think that, instead of loan forgiveness, there should be a cap on the amount of interest any student loan can be charged…”

      Smart and sensible; they’re never go for it! :-)

      • Endeavor says:

        No forgiveness but only owe principle and no interest.

        • Old-school says:

          I don’t know if you are aware that an interest rate is roughly the risk free rate for a given time period plus the anticipated default rate. It sucks that a person that pays on time pays for those that don’t, but the borrower has a choice to decide if rate is acceptable.

          In some ways I am OK with forgiving the loans because young people will be picking up the tab in taxes over their lifetime and I will be dead and gone.

  39. Joey W says:

    People keep arguing over how to treat the side effects.

    Let’s fix the cause of the problem. The higher “education” industry is a cartel of credential issuance.

    Just like with real estate, the lobby and alumni of whom are established in power have the most at stake to lose, so the convenient narrative of this being an “education” problem overwhelms the opportunity for critical thought.

    Most information and knowledge is now a relatively inexpensive commodity thanks to the Internet. Student loans are now serving to prop up a system of providing a cultural experience.

    The time is ripe for disrupting the credentialing apparatus. I predict it will be the next killer technology platform. The hard nut to crack will be the current credential holders, as nobody wants to admit their hard earned trophy is worth less.

  40. Miss Lacy says:

    Clearly it’s a mess, with universities with bloated staffs and yet more and more football fields. And the whole university of the resurrected bird boondoggle to rope in the ignorant is pretty disgusting – and has been going on for Decades. This is not news. Yet the chumps get roped in because, well … the taxpayer will be there.

    For myself, I worked to earn money to pay for college. The last time I strolled down the streets in a famous southern university town, what I saw were saloons, tattoo parlors and fast food joints full of students taking mid day beer breaks from the rigorous curricula of basket weaving and gender studies. So color me not amused.

  41. Senecas Cliff says:

    When the U.S. switched gears from being an industrial economy to a debt fueled finance/IP and service economy around 1980 it was inevitable that internal costs would rise drastically. For industrial and consumer goods this was handled by offshoring most production to countries with cheaper costs, for agriculture and manual labor it was handled by cranking up legal and illegal immigrants to hold down wages in those fields. But the higher education industrial complex was a big problem as internal costs would inevitably rise much faster than the average income of families. The solution to this problem was cranking up student loans guaranteed by the government, to allow the university complex to crank up tuition to cover its rising costs. We are now at the end of that road and the piper must be paid.

  42. HollywoodDog says:

    The worst part about the forgiveness plan is that it leaves the fundamental problem of the “university-corporate-financial complex” unaddressed. The day after forgiveness, the debt would just start up again–but at a much faster pace because everyone would have expectations of debt forgiveness.

    My solution: Public colleges and universities should have only nominal tuition and admittance should be merit-based with minor adjustments for adversity. (It would be much less costly to the taxpayer to just outright fund efficient education than to partake in the crazy let-the-student-spend system we have now.) Private colleges and universities would have to offer their students private loans at market requirements, conditions, and rates. You want Yale? You pay for it.

  43. RoundAbout says:

    The laws should change to allow students to refinance their schools loans into longer terms with lower rates. Rates are going down right? For instance, if it was a 10 year term increase it to 20 or 30 years. So, if its $500 a month now its $250 or something more manageable. Wall Street can earn its refinancing fees. In exchange, get the government out of the student loan business and lend less. Also, if the student pays principle then the forward interest payments should only be calculated on the remaining principle.

    What I bet would happen with these politicians and students is — the loans would double with the lower rates. The students will protest for bigger loans ( since they tend to be manipulated ). The situation will become more severe to preserve the scam. When it all blows up they can blame America.

    • Just Some Random Guy says:

      The govt took over student loans in 2010. There is no Wall St involvement in any of this. It’s a govt created problem. And like all govt created problems, politicians are promising that the govt will solve it.

      How likely is that?

      The only solution is to stop funding the monster. If nobody paid $60K tuition, then colleges would be forced to lower prices. Just like in any other industry. But when colleges know there is a never ending stream of govt backed loans available, they just keep jacking up the price.

      And also students need to stop living in 5 stay luxury hotels, aka student housing and start living like students used to live, in dingy apartments.

  44. Forgiveness implies there is some public good attached a free college education. That good would be micro-economic, students would have more money to spend which would help create economic demand. This is the basic reason government debt keeps increasing, if you cap new debt old debt becomes a drag on the economy. The catalyst here is University research. No new products or new technologies and graduates have a tough road ahead. Government inserts itself in the process providing dubious economic benefits. You back off the military payola, and climate deniers throw the economy back to the dark ages. Environmentalists are conservatives in a conservative age. It’s all about the research which is what student fees are all about.

  45. Keeper Hill says:

    Again its a simple fix. Moving forward allow people to discharge the debt. Suddenly the cost of college and university will have to be lower because many would no longer be able to get funding. And rightfully so.

  46. Just Some Random Guy says:

    Heh…right after reading this article, I was on LinkedIn and saw this in my feed…a college in Canada is super duper excited about its new residence. That’s the cost? Oh a mere $110M.

    What does it have for that much money?

    “The upper room is an active learning area, which can seat 400 at 45 large round tables and is lined with large TV monitors that allow for interactive discussions. All of the walls are finished with whiteboard material to facilitate writing and sketches.”


    What else….

    “From the lounges on each of the residence’s seven floors, expansive windows offer unobstructed views of Cootes Paradise, a nearby natural sanctuary and wetland surrounded by forest, and McMaster’s athletic fields”

    Oooooh fancy!!

    And on it goes like that.

    And then gee, you wonder why college has become so expensive? It’s a mystery I tell ya. A real head scratcher.

  47. flashlight joe says:

    Allowing students to declare bankruptcy if they cannot pay the student debt is a better solution than a blanket forgiveness of the debt.

    As I recall, the corporate lobbyists pushed a bill through congress about twenty years ago to specifically disallow bankruptcy to get out from under a loan they can never pay.

    Davie stated it above. It is a “predatory loan system”. The whole purpose was profits for the connected institutions. Remember that in the financial crash, careless people who gambled in real estate were allowed to declare bankruptcy. Many banks and other financial institutions (AIG, for example) had their debts forgiven (i.e., covered by the taxpayers).

    Why not students who were trying to get an education and they “followed the rules”, not expecting a financial crises to destroy the job market engineered by the banking system.

    These people who cannot pay off these student loans are debt slaves. When a herion dealer hooks another customer, who is the real criminal? Who is the victim?


    • Setarcos says:

      @flashlight “When a herion dealer hooks another customer, who is the real criminal? Who is the victim?”

      Answer = both & both. And it takes two to tango. Anyone who sees this situation or the financial crisis as a few bad actors, the result of wall street greed (which has always existed, as well as our own greed and envy) is ignoring the obvious. Problems of this magnitude requires bad policy, cronyism, systematic abuse, etc. Anyone who thinks their “side” is 100% righteous will never contribute any meaningful solutions.

      Lots comments above where obviously bad policy and poor resulting behaviors are defended and justified by simply comparing to other bad policies and behaviors. It’s obvious that we have the politicians to reflect this unfortunate situation.

      • flashlight joe says:

        @ setarcos,

        Yes people make bad decisions for all sorts of reasons – ignorance, bad advice, greed. Perhaps heroin addiction was a bad example.

        Here is a better example:

        The perpetrator of the fraud is the one who gets legally punished. The victim is not legally punished, although they may suffer a loss.

        It was bank lobbyists who lobbied (bribed) congress to prevent them from declaring bankruptcy, and thereby lock the debt slaves in. It was a criminal plan.

        • Econ_teacher says:

          The loss is the consequence. That’s how you know we no longer have a market economy; no ones allowed to exper6the consequences of their actions. Instead, it’s all externalities, i.e., third-party costs, ie.g., low interest rates for savers and pensioners and the expectation that taxpayers will make misallocaters of capital whole because the institution or the social group,i.e. students, are systemically important.

  48. joeeskimo says:

    The economic impact of too many students with debt is obviously a long-term problem. Here’s a FRED graph of GDP related ideas, make of it what you will — ideas welcome!

  49. Crush the peasants! says:

    What is the market price for a reasonably healthy kidney?

    • NBay says:

      When “person”ell became human “resources”, I figured life wasn’t likely to be quite as much fun as it was before for those in the cheaper seats.

  50. Winston says:

    Student Loan Subsidies Cause Almost All of the Increase in Tuition
    Monday, December 21, 2015

  51. JR says:

    Wolf, thanks for this article. Can you give me your perspective on something you mention that would have a lot of downstream consequences, which is:

    Assume you could lower max loan amounts. It will cause a cascade of lower enrollment rates due to lack of affordability, which results in schools seeing a drop in funds – but also results in a less educated workforce, at a time where we need a higher educated workforce, particularly in science/eng/tech.

    Do you have further thoughts on things that could be done to give access to those who can’t afford it while still reducing funds to the university industrial complex?

    Or is the idea that for a decade or so we’ll have a huge drop in higher education because of affordability issues, but eventually prices will drop and the generation afterward can now access things at more affordable prices?

    Basically, what does the cascading look like to you (ie: lower loans -> lower attendance -> lower funds to universities -> lower tuition rates)?

    • Wolf Richter says:


      I always assume that everything is dynamic. This means that an action causes instant reactions, and not always in a linear manner. So when student loan caps get reduced, universities instantly react by accommodating the same number of students despite lower student-loan limits. It’s their business. They cannot operate with empty classrooms. They have a lot of fixed expenses. They have to bring in revenues. So they lower tuition and other costs to fill their classrooms and make it work.

      The corollary has already been proven correct time and again: as student loan limits go up, tuition goes up.

      • Wolf Richter says:

        In addition, we may be seeing the last hurrah of the brick-and-mortar colleges. Online education can be an immense cost saver. Many courses are already mostly taught online by regular universities.

        This is just the beginning. It’s where brick-and-mortar retail was 10 years ago. There will still be physical locations to go to, but if much of the teaching and research goes online, a very small campus can handle a lot of students. Students could live other cities and only periodically show up to take tests, etc.

        Universities resist it because it would be the end of the glorious university campus. But there will be the Amazons of education that will offer it as an alternative. And it could change the financial equation of higher education dramatically.

        • DawnsEarlyLight says:

          Many universities add online class charges for each credit hour, in addition to the normal on campus tuition and fees. You would think taking online courses would be cheaper. For example, Indiana University charges $50 extra per credit hour for a online course, verses taking the same course on campus.

        • sc7 says:

          Online education needs to get its quality up dramatically before it is taken seriously. The curriculums are far too “education-factory” like, and when you dive into the criticism with many of the most popular programs out there, they’re pretty bad. Schools that are primarily online tend to have some of the highest student loan default rates too.

          I can easily spot job candidates with online degrees, and they’re almost universally significantly underprepared compared to brick and mortar degree holders. The quality is just not there. Online education has been around for 20+ years, not sure when it will finally “turn the corner”. I do not at present see an analog to retail, it’s fundamentally a whole different concept.

        • Econ_teacher says:

          This day cannot come soon enough as far as I’m concerned and I hope the unis lead the way for k12 to go self-paced and online. Teachers unions, administrators, and bloated government bureaucrats are killing our kids’ futures with their remorselessly ineffective system.

    • Econ_teacher says:

      I’d like to add that if you can’t learn a skill like coding independently in four years with the absolute wealth of free information, there’s no professor on earth who can teach it to you without upending marginal costs. It’s a credentialing cartel. Note: Google, apple, Amazon, et al are increasingly willing to overlook the lack of a degree if you have a portfolio.

      • Econ_teacher says:

        To clarify, a portfolio of work in the field, not investments, although that probably won’t hurt.

  52. flashlight joe says:

    @ SC7,

    It is easy to prove that a government agency is buying stocks. All you have to do is look at the books of the CIA. But then you can’t, because the whole organization itself is a conspiracy.

    We the people have no idea how this ephemeral fake money is being moved around the scenes in secret.

  53. Gandalf says:

    Excellent article about the leaves and the branches, and the trees, etc., etc

    You’re missing the big gigantic forest, though, which is that educational costs have outrun the alleged CPI for the last forty years

    I posted several times before about this, with references. Education, healthcare, and new home construction costs, which now account for over 30% of our alleged GDP, far outpace the alleged CPI, averaging 5-10% per year for the last FORTY YEARS..

    These are industries that are not amenable to high degrees of automation (and I’m talking about factories that can spew out millions of bags of potato chips or Jack in the Box tacos with maybe 20-50 workers instead of thousands, cotton harvester/processors that can do the work of 1500 or more humans, etc.), nor can they be globalized or completely shipped to China (yes, house components come increasingly from overseas, but the land is still in the United States, as are the workers. Much cheaper factory built housing is still looked down upon as trailer trash)

    When I started medical school some 40 years ago, I took out student loans totaling $20,000. Terms were generous, and I did not have to pay the loan back or accumulate interest as long as I was still in school or training. Nine years later, after an internship, a change in specialty, residency, and fellowship, the then high rate of CPI (not quite as cooked as it is now) had driven wages and prices to the point where that $20,000 loan was less than the cost of the first two cars we ever bought. When I finally got a real job, after two years of making monthly payments, we decided to pay this off in a lump sum

    Since then, intense automation and globalization has meant that the $21,000 we spent on that Ford Taurus station wagon in 1991 is only a few thousand away from a base Honda Accord, both made in ‘Murica.

    Wages have not gone up much either. As a radiologist, I literally do 3-5x more work than in the 1990s, and make just slightly more money than 25 years ago.

    Yes, automation has hit healthcare, my field, radiology, hard, in the form of PACS systems that allow you to read faster. The payors have figured this out and reduced reimbursements accordingly – by some 10-20 fold for MRIs and 2-5 fold for other studies.

    No doubt, radiologists will be replaced by deep learning AI someday, probably not completely for another 10-20 years though. Visual analysis and diagnosis by deep learning AI is already happening for dermatology pathology skin lesions

    Will this finally cause healthcare costs to stop rising? Not until they figure out how to build robots that can do the physical labor of nurses and other the other physical tactile skills required in healthcare, ranging from lifting grandma out of bed onto whatever (without tearing her arm off) to doing complex neurosurgery, eye surgery, general surgery, etc.

    That which cannot be easily automated or globalized will continue to rise in cost at rates far higher than the cooked alleged CPI. That’s the real reason underlying the ongoing student loan montrosity.

    And what is causing this high rate of inflation? Simple- the low rates and easy money policies of the Fed, which has utterly failed to realize that in today’s world, different parts of the economy inflate (and some actually deflate) at different rates. By adhering to the dodgy CPE/CPI with their basket of goods weighted towards the deflating parts of the economy (globalized and automated durable goods), the Fed has created this monstrous and persistent inflation in the other parts of the economy.

    And here’s the key point- this massive inflation in education, healthcare, and new home construction costs all started in the late 1980s with the easy money policies of Greenspan, and the changes to how the. CPI is calculated

    • DawnsEarlyLight says:

      Very informative Gandalf. What will happen to all the administrative/clerk positions in the healthcare professions, that are probably much closer to losing their jobs due to some seemingly small innovation, just around the corner? According to the latest jobs reports, this number would not be small potatoes!

      • Gandalf says:

        All the X-ray file room clerks and medical transcriptionists are long gone, replaced by digital computer storage PACS and voice recognition software.

        Blind people used to be able to work in Radiology Depts as dark room techs to develop the xray films – gone, gone gone.

        I remember the last of these blind guys, 15 years ago, getting laid off when we got our PACS

        In medical school, I bought this textbook on EKGs and learned how to read EKGs. By the 1990s, computer programs were able to do this with high accuracy

        And yet healthcare costs continue to rise, simply because healthcare continues to be labor intensive, ie, requiring expensive human beings with limited throughputs that are a thousand fold less than what machines can do in other industries. And healthcare cannot be easily globalized – the system of licensing and certification and regulation by all sorts of agencies from the FDA to state licensing boards for EVERY skilled healthcare professional means that healthcare is more like a tightly restricted medieval guild than most modern industries

        So, really when the Fed considers what the interest rate should be in order to not stimulate rampant inflation, their calculations, based loosely on the Taylor Rule, have been thoroughly skewed by the combination of changes made to CPI calculations to lower the apparent rate, and the vast divergence in the various inflation rates of different parts of our modern economy

        • DawnsEarlyLight says:

          How about the health information techs and bill coders? Seems a lot of these positions are ripe for Rosie Robot.

          Regarding the rising and hidden costs of healthcare start to make sense after two of your statements..

          ….healthcare costs continue to rise, simply because …healthcare is more like a tightly restricted medieval guild

        • Gandalf says:

          There certainly is a lot of room for increased automation of health information and bill coders. I am fairly certain that what is opposing this pressure is the same sort of strict regulation of billing which has steadily increased over the years, and really ramped up with passage of HIPAA and the Affordable Heathcare Act.

          In the last 10 years, increasing numbers of hospital chains and individual doctors have gotten dinged by CMS, the regulation arm of Medicare and Medicaid, for outright fraud or other irregularities in billing. Some hospital chains have been fined $100 million or more. It has gotten so strict that as a hospital-based physician, my hospital chain requires annual educational courses which they provide to certify that I understand that I should not do anything to get them in trouble with the government in terms of billing violations.

          So there you have it. Tight regulation of healthcare professionals to ensure a minimum standard of care in the community leads to a need for lots of schooling, some quite expensive (see above re: education costs) to get that all important certificate or degree that declares that somebody is qualified to work in a particular area of healthcare. It also limits the numbers of people who can work in these jobs.

          The flip side of all that though is that if you don’t regulate any of this, you do end up with something like the healthcare in Mexico.

          I see lots of posts here on Wolfstreet extolling the virtues of cheap healthcare in Mexico. Good luck with that!

          I’m sure there are a few good physicians in Mexico. But, I’ve certainly seen enough malpractice committed by Mexican healthcare including cases qualifying as gross negligence manslaughter. This is what happens when you don’t have adequate monitoring and licensing, you get this free for all Wild West of not ever knowing that what you are getting meets some level of a basic minimum standard.

          As for the rest of the story on why healthcare is so expensive in America – it does get complicated. The rise of expensive technology is the #1 reason, and is why healthcare costs have increased in every modern nation on Earth.

          Just consider this one fact: in 1963, Jackie Kennedy went into premature labor and delivered an infant estimated to be 32-33 weeks gestational age. The best healthcare available in 1963 for this child of the First Lady of the United States was watchful waiting, followed by death. Cost? Super cheap! Today, thanks to massive advances in technology the survival rate of a 32-33 week gestational age preemie is at 99%. Cost? $102,000 average in hospital charges according to a 2010 March of Dimes study

          Yes, there are enormous improvements in efficiency, eliminating wasteful healthcare, and being able to deliver universal healthcare in the United States. This is a huge topic not suited for this forum, but I will just briefly dip into it.

          The healthcare system in the US is clearly struggling in many areas with excess cost and wasteful utilization while denying healthcare to many. The reasons these problems have not been solved have simply been innumerable political bottlenecks thrown up along the way over the last 70 years or so. Of the countries with universal healthcare, Germany seems to have figured out the best model for healthcare, IMHO. But, it is a very different system! Very German, very regimented, not necessarily suited for the free wheeling, Save Grandma At All Cost American mentality. I’ll just leave it at that.

          There are no shortcuts in healthcare. You can ONLY ever get two out of these three, or some middling compromise of all three:
          1. the best healthcare ever
          2. Universal healthcare for all
          3. inexpensive healthcare.

        • NBay says:

          Thanks for a very interesting read Gandalf.
          Just had to comment on the computer power increases. I was studying Chem/Biochem in the early-mid? 70’s when we had a NMR machine. Doublets, triplets, spin-spin coupling, etc. It was cruder than going to the Sadtler Spectra books with IR scans to identify. They dropped the “N” as the public didn’t like it, but after dropping out of Pharmacy School at OSU after the first year (for reasons I will skip), and finally ending up as an electro-optics field tech, I was totally amazed at what had happened to NMR when I trashed my knee and saw my first MRI. Like looking at TV!

        • Pelican says:

          Thank you Gandalf! That was very informative and made for an interesting read as well!

  54. TownNorth says:

    Those who feel that, because they paid off their loans many years ago, today’s students should be given no slack are comparing apples and oranges. Tuition increases have far outstripped CPI, geometrically so. Students today have substantially higher costs in real terms, through no fault of their own. I have seen my nieces and nephews face this dilemma.

    And as someone pointed out in the comments earlier, a lot of debt is incurred at for-profit colleges that provide little to no value. The government should not be in the business of lending at these institutions.

    Finally take a glance at the recent Liberty University exposé at Politico, shining a light on the college landscape today. One of the money quotes:

    “We’re not a school; we’re a real estate hedge fund,” said a senior university official with inside knowledge of Liberty’s finances. “We’re not educating; we’re buying real estate every year and taking students’ money to do it.”

  55. KGC says:

    The Federal Government does have a Student Loan Repayment Program. It’s available to active duty military. Sadly 80% of those with student loans are unable to meet the requirements to join that association.

    • Stephen says:

      And the requirements for military service have been lowered drastically. I am a former Marine Officer and I am appalled at the number of really fat men and women wearing the uniform of the US military. As a young Marine Officer, I helped put together the separation packages used to out-process fat Marines. We simply kicked-out people if they were not willing to stay within weight guidelines and pass their PFTs. Today, I guess they don’t care because it would not be politically correct to tell a service member to lose weight and get in shape or ship out!

  56. Rat Fink says:

    ‘Can you show me concrete evidence, not speculation or conspiracy theories, that the fed is buying shares of companies en masse?’

    Explainer: ‘Plunge Protection Team’ to convene amid Wall Street rout

    You’d have to be living in a very deep, dark, hole — in a complete state of ignorance (or profound delusion) NOT to know that the central banks are massively supporting the stock markets.

    In addition to plunge protection we also have record low interest rates being extended to corporations …. so struggling companies like APPLE are able to tap tens of billions at virtually no cost — and they use that money to — you got it Pontiac — BUY BACK SHARES and drive the markets higher.

    You asked for it – you got it — a double barrel full of facts.

    • Rat Fink says:

      Oh and btw, did it not occur to you that the trillion dollars of student loans are not in themselves supports for corporations and the stock market?

      Think of all the iphones, game stations, Uber rides and avocado toasts that were purchased with that cash.

      If I were a millennial I’d be looking at the corporate welfare scheme — and I’d be queued up looking for a teat to suckle as well….

      First I’d get my undergrad in the easiest course with the least class hours required, then I’d shift over to the second easiest course, and so on. I’d run up a couple of hundred grand in student loans and try to keep the game running until the sh&t show otherwise known as the global economy, collapses.

      Some may think that immoral, but those would be people who are operating under the old normal.

      The new normal is all about playing an angle, pulling a scam, getting over.

      Think not? Have a look at the WE IPO. The founder sold $700M in shares and he sold the word WE to the company (that he owns) for large dollars.

      Is he going to jail? Nope. He’s living LARGE!!!!

      He’s got his scam. I’ve got my scam. The only difference is that he flies in a private jet and eats caviar in a cereal bowl. I eat avocado on toast and get around on a Lime scooter.

      Tally ho ya’ll. Get with the program!!!!

      • GirlInOC says:

        ha, great observation.

        and totally as an aside….we are officially dealing with Gen Z in colleges now. I’m so tired of hearing of Millenial bashing, I can’t wait for Gen Z to get theirs. I’m assuming at this rate people will accuse them of being lumps of coal à la the people in the cartoon Wall-E.

        • Wisdom Seeker says:

          It’s already an insult to call people Gen-X or Gen-Z instead of something more descriptive and positive. That whole generational language is Boomer-driven abuse of anyone not a boomer (or child of boomer aka Milennial). Talk about micro aggression!

        • GirlInOC says:

          Well it is a continuing trend because they’ve already dubbed the next crop of kids Gen A (alpha). Definitely speaks of the ingenuity of boomers (or lack thereof) to stick to the alphabet.

      • Rat Fink says:

        In our current economy, corporations have sunk $2.5 trillion in buying back their own stocks because this generates the highest work-free return. This reflects two realities:

        1. Corporations can’t find any other more productive, profitable use for their capital than buying back their own shares (enriching the managers via stock options and the 10% of American households who own 93% of the stocks)

        2. Thanks to the Federal Reserve and other central banks injecting trillions of dollars of nearly-free credit into the financial sector, corporations can borrow billions of dollars to play with at near-zero rates that are historically unprecedented.

    • Old-school says:

      I don’t know if you are aware that an interest rate is roughly the risk free rate for a given time period plus the anticipated default rate. It sucks that a person that pays on time pays for those that don’t, but the borrower has a choice to decide if rate is acceptable.

      In some ways I am OK with forgiving the loans because young people will be picking up the tab in taxes over their lifetime and I will be dead and gone.

  57. KFritz says:

    In a certain sense it’s unfair to anyone who’s paid off a loan in full, when another deadbeat, so to speak, is let off the hook. Yet that happens every time someone declares bankruptcy. It’s an unfair world. And student loans are nearly unique in that they can’t be discharged by bankruptcy–which is another big sop to the well-connected grifters at the top of the educational-industrial complex. So, yes it is a kick-in-the-teeth to provident citizens to write off all student debt, but only the scale is unprecedented. I also venture to say that part of of a better solution to the housing loan crisis of the previous decade would have been a write down of some of the housing debt engineered by the grifters at the apex of that mashup, instead of blanket mass foreclosures.

  58. Otishertz says:

    Why isn’t there a free national online college where people pay for tests only? It doesn’t make sense to have thousands of penguins teaching the same lesson over and over when lessons from star educators can be recorded and transferred at essentially no cost.

    Why not hire penguins, record lessons, and give them a perpetual royalty on test fees?

    That would be too easy and make too much sense. Also, as Wolf points out, this financialization of a basic need benefits the establishment.

    • Otishertz says:

      Think about it like the music industry. If a professor has a hit lesson that gets more results for students on tests then more people will download that lesson. When someone who took that lesson pays for a test, that penguin would get a fractional cut.

      The SAT and ACT tests already have demonstrated how professional testing businesses operate.

      Instead we have neofeudalism and indentured servants. Just check out the trend of companies financing education for students in exchange for a cut of their future earnings.

      This smacks of serfdom.

  59. Mean Chicken says:

    I totally agree, Wolfe.

  60. Anon says:

    The issue is that legacy institutions are clinging-on-to a losing business-model. Institutions are using all the political capital they can muster to keep the bright-new-ideas of 30 years ago going. Plenty of practical ways to clean up student-loans but clean-up is unlikely to happen while politics is trying to open up a bigger hole to poor money down.

    Similar thing is happening with Fannie Mae and Freddie Mac. If a big China Trade deal happens (unlikely IMO) then legacy institutions are off-to-the-races for another 10 to 20 years. I think politically connected groups think a China deal is going to happen soon and are trying to have above agencies privatized. Trying to repeat CEO Raines era.

  61. sierra7 says:

    Again, a great article that stimulates debate.
    First, nothing is “free”. Healthcare, college, etc… either paid for by private funds or by public “taxes”. It’s all about chosen societal priorities.
    We live in a “predatory” system.
    We are all targets of opportunity. It’s “snake oil” all the way.
    I always believed that one of the most important parts of university “education” is the agglomeration of students of all races, backgrounds etc., with the attended opportunity for debate outside the regimented required classes; a “free exchange” of ideas.
    Unfortunately too many in the US equate “free” education with “socialism”. Bad analogy. As I stated above, nothing is free. It’s all about what kind of society we choose to be.
    So far we believe that a predatory one will winnow out the weak from the strong; the dumb from the dumber; and “monied profit” will be the winner.
    Trouble is in my opinion, “profit” sometimes crushes “progress”.
    Predatory lending, gullible parents/students, greedy higher education campuses, loose regulatory systems, propagandizing future earnings/jobs from “higher learning”, a narrow vision of the future for our young is restricting our ability to “reform” the whole system.
    In “my day” you could go to a great university by working your way thru; today you have to go into horrendous debt or you have to have parents (or other concerned relatives/friends) who are willing to sacrifice very dearly to pay your way which in my opinion is disproportionate to the results. And most state or community colleges were taxpayer supported; only had to buy the books which were no where near as expensive as today.
    Something is way out of kilter.
    But, like I said above: It’s all about our societal priorities. Like anything else we sense that is not quite right, we have to have the will to execute those changes.

  62. AJS says:

    >>>When I started medical school some 40 years ago, I took out student loans totaling $20,000. Terms were generous, and I did not have to pay the loan back or accumulate interest as long as I was still in school or training. >>>>

    That sounds like a dream. My wife is currently stuck in this student loan system. She is just finishing her residency as a physician.

    She’s stuck at 7% interest through the government with no possibility to refinance. Current rates are 4.5%.

    If she does the 25 year income based repayment plan any amount discharged will be taxable under current law.

    It’s a crappy system through and through. Her medical school raised tuition every single year. They know they can do it, everyone will agree to it, and the government will fund it.

    • Rat Fink says:

      I had a 5k student loan in Canada 25 years ago, was unable to make payments when I initially came out of school as I was not immediately working in a job that paid enough to deal with the loan repayment.

      The debt collectors started hounding me (actually they called me a deadbeat and every other name in the book) and I told them if that’s the way they handled things then I would NEVER pay this back so long as they were taking a cut

      In fact some months later I contacted the government and offered to pay the cash back but only if the debt collectors did not get their piece.

      Not possible.

      So I paid nothing and left the country never to return.

      The debt collectors found me and they understood that I was in a position to pay the cash back out of the spare change in my pocket (they somehow knew I had some successful businesses).

      I had a great time mocking them explaining how I could not pay because I needed more Champagne and caviar and new brakes for my Porsche.

      Maybe next month. Make sure to call back to remind me

      They tried to shame me but that worked about as well as screaming profanities at me.

      I told them that I was more than happy to pay the whole lot off in one go but NOT if they got a single red cent.

      Fast forward perhaps 15 years and I contacted the government and offered to pay the loan provided the debt collector was out of the picture.

      ‘Oh – we don’t have a record of any loan — we write off loans after so many years’

      Yes but I will pay it off anyway.

      ‘You can’t because there is no loan. It no longer exists’

  63. Matt Belben says:

    A good related book about this is “The Case Against Education” – basically an assertion that:

    – Because of the current widespread, easy access to higher education and the resulting societal expectation that you’ll get one, employers tend to use an applicant’s level of education as a shorthand for how good and reliable of a worker they are. The actual skills they have are secondary. If everyone has a bachelor’s, then why not require a bachelor’s to become a barista? It shows work ethic.

    – Because more people are getting higher degrees, the “normal” level of education rises, thus forcing people to get even higher degrees to stand out, in a feedback loop. The story we’re told is that more education in a society is always better. In reality, this situation is zero-sum. If you stand up at a concert you’ll get a better view. If everyone stands up, then nobody does.

    – All of this happens mostly independently of the level of education actually required to do the job. As far as the actual usable skills go: the employer is more than happy to let their applications train and screen themselves, at their own expense, so that they don’t have to do it.

    Essentially what’s happened is that the easy government-subsidized access to higher education has inflated away the value of a high school diploma, and of the value of whatever the skills are that are actually required to do a given job. It’s sparked off a sort of bubble where the degree itself – or more specifically, the piece-of-paper-that-shows-a-higher-level-of-education-than-everyone-else – is what’s valuable, and is ever increasing regardless of it’s intrinsic value.

  64. Implicit says:

    The whole financial system is ripe with fraud and corruption .It has, and always will favor the wealthy. But the outright greed now can be seen plainly by looking at the wide income gap, and the even wider debt gap as a percentage of income favoring the wealthy and hurting the middle and lower classes. and the whole thing wouldn’t have happened if Glass- Steagal was repealed by Clinton in !999, thus allowing banks to get drunk on derivatives. They should have been allowed to fail and file for bankruptcy like the law permits. Many people are brainwashed by the rich saying that i was necessary to bail out the banks. It was the worse mistake ever. Things have only got worse with only the wealthy and the banks themselves profiting. Now the whole world iss on the verge of a meltdown because of the overwhelming debt that rezlly got rolling with the bailouts.
    It is interesting that the stock market is at all times highs , yet the world is drowning in debt, and economies are slowing, The debt demands relief, and it will get it one way or the other. Negative interest rates, trade deals, Brexit are not the primary variable that everyone is afraid to deal with or talk about, because it is too late. Student loans will not even be a big variable in the scheme of events. Buckle-up and and take care of your own real and figurative garden, family and friends- your most important assets. We will see how the elections go as far as the student debt goes. I’m betting the loans will get extinguished one way or another. Place your bets.

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