[adpoe]

Opinion:

Just like the stock market, college is also an investment. There is risk involved.

One of the main problems is that this is NOT communicated well. (If it all.)

Too many people take on huge long-shot risks that are unlikely to pay off.

Yes, if you get an English degree and become a professional writer selling books and screenplays at $1MM a pop -- that's an awesome and incredible gig. But not many people can get it. The $30k - $150k for that degree is a very risky investment.

On the other hand, spending $30k for a degree in engineering, CS, physics, math, etc... is much less risky. And it's a better investment. However--even in this case--maybe it's not worth the extra $100k for a private college. Maybe Big State U is good enough, and a safer bet with similar outcomes.

When I first went to college, everyone around me said: "it doesn't matter what you major in, just get a degree and you'll be fine." They were wrong. It doesn't work that way anymore (if it ever did).

Communicating this risk/reward tradeoff, and what it means for one's future, is the source of most college-related money problems.

--- Personal anecdote: I have a CS degree, but started out in a liberal arts discipline. So those experiences form my opinions.

[virmundi]

You can't discharge college loans if taken from a federal program. Unlike other ventures where you can pay pennies on the dollar when you bet and lose, such loans are pursued by the full force of the United States.

[learc83]

They also come with income based repayment plans that mean you'll never have to pay more than 10% of your discretionary income (income above 10% of the poverty line), and they are cancelled after 20 years of payment.

[virmundi]

That is still a reasonable period of time to make them low risk. So we get a market flooded by cash. And now due the ubiquity of degrees, many are worthless but necessary. They are becoming the high school degree.

[learc83]

The risk doesn't really have anything to do with "a market flooded by cash".

The government distributes loans because legislation forces them to--not because they are low risk--and the money comes directly from the department of education not private investments. Private loans are only about 7% of the loan disbursements.

[astrodev]

If that's the case, then I don't understand why the student loans are said to be such a big burden. It's just another tax, I wish more taxes were voluntary like that.

[learc83]

It's definitely the case. Part of the problem is that not everyone knows about income based repayment plans.

You mostly get a few groups complaining about the burden. People who don't know about income based repayment, people who make too much to qualify (basically what they'd pay if they paid 10% of their discretionary income is higher than the standard 10 year repayment plan), and people who took out private loans to go to for profit universities, or expensive private schools that weren't top tier (private loans are only 7% of total disbursements).

Add to that the arm chair analysts who see news stories about student loan debt and complain for them.

That's not to say that some of these grievances aren't legitimate. There really are people with $100k loans with useless degrees from for profit universities, but they are a small subset of loan borrowers.

[lovich]

thats only if its government loans. Private loans are still not dischargeable and don't have income based repayment

[learc83]

Private loans make up about 7% of student loans dispersed each year.

[lovich]

Is that current or always? I went to college 2007-2011 and the first two years everyone I knew got 5.5k and 6.5k loans from the government and then private loans for the rest. After the great recession no one could get private loans anymore and the government filled in the rest

[learc83]

Looking at the statistics, it looks like its been around that level for a while. Private loans make up a bit less than 10% of the overall outstanding student loan debt, not just new debt.