I think I was 47 when I finally paid mine off. My wife and I are doing everything we can to help our boys get out of college debt free. Starting your career at a net worth of zero is so much better than negative tens of thousands.
I think being in debt is too normalized. I know there are specific financial instruments, that if one is savvy, can use to be in debt but come out ahead. But for the average person, I do not think mortgages and loans should be so widespread. Schools don't teach the upper level of financial suave, and neither do most parents who aren't already wealthy.
We should normalize buying a home and owning it outright, even if it takes more up-front capital. It's something that should have been done when housing was cheaper, if you ask me. Me and my girlfriend watch a lot of House Hunters on HGTV and almost every episode concerns someone buying a house with the expectation of mortgaging, so that they can get a house beyond their immediate means.
They are issued for something [contingently] incredibly valuable that cannot be repossessed. They are also generally issued at a lower rate of interest with little collateral, in part due to the fact that they cannot be discharged in bankruptcy and the resulting lower risk.
[edit: added "contingently" above. Some education programs have been found to be scams yet could be paid for with debt. I generally stand by the value of higher education and have found it to be a net benefit in my own life. The value has been strained as costs have shifted and the social contract is rearranged behind the backs of educators at all levels]
There's nothing rigged about loans being made for something that can't be repossessed and without collateral, there's a whole segment of the lending market for that (consumer lending, eg people take out loans to go on vacation). So absolutely nothing rigged about that. And those loans can still be discharged in bankruptcy. There's a government guarantee, but that's at least as much an advantage for the lender as for the borrower. The relatively low interest rate is a result of that, the loans aren't high risk for the underwriters. Government guarantees aren't unique to student loans either btw. The only thing that's really unique is that the loan can't be discharged, and that is very much a disadvantage for the borrower. So student loans are rigged against the students. No bank would want to make those loans under normal circumstances, so the government has rigged the game in their favor to entice them into the market.
Education is a unique product, which I'd argue warrants favorable loan terms. Ignoring the inability to declare bankruptcy.
Even in non-scam programs, there's sometimes a massive amount of unknowable hazard on the path to a degree. And whether or not the degree is attained, the debt is still due.
In terms of hazard, I don't mean grades. Assume perfect grades. Especially in graduate programs, interpersonal politics can permanently wreck students who then have no effective recourse.
Examples and intricacies of what I'm trying to imply, aside, consider that education is a unique product that costs a lot of money but, in the process of attaining the product, you aren't treated as a customer but as if your position is precarious. Grades aside. Whatever specifics you might imagine, as they would vary, assume that the system is set up to protect the school that is collecting money. Not the person paying it.
Coming back around to my ultimate point about loan terms and risk.
I don't know how intentional your choice of words was, but describing education as a 'product' is a sad reminder of the current state of the world. It's as if every action and experience in life must be translated into money.
Colleges, let alone Universities, used to be much fewer in number.
It used to be more widely known that the better Colleges, that is mostly the Ivy League and the top Liberal Arts colleges, were the only educational institutions that mattered in terms of imparting the vaguer yet more elite type of education of which you are likely thinking.
That is, the institutions who reliably facilitate the fuzzy process of becoming an educated person who can think like one. In the elite sense of these things.
What we've lost to an extent, in the multi-decade long taxpayer funded college degree bonanza, is that it is these elite institutions which are still seen as the only colleges that matter in the sense that I think that you are implying.
Other colleges are not truly valuable in this sense. So what are they good for? They are good for work training and certification pathways.
Universities have no problem charging obscene rates, which is hard cash, for something that they too would like to be only distastefully associated with money when debating the merits.
If it isn't translatable to money, then make it cheaper. Or keep the value firm and high, but also let's talk about what is being sold.
The 'value' of the education can vary widely. Both in terms of value meaning the ability to use it as a credential for high-paying jobs, or in terms of the imparted skillset/knowledge that either make you a better person or enable you to achieve things like starting a business/inventing/etc.
I mean there is a HUGE spectrum here. And this means that there are many educations paid for with debt that are utterly useless (and therefore valueless) on both of these metrics. In other cases where an investment failed to this extent, you can declare bankruptcy. But not student loans! No no no. Those are forever. Hardly a favorable condition for the borrower.
I'm curious too. The rates aren't particularly generous. Okay, maybe they're a bit lower than the private markets might deliver given the rates of default. And maybe they let you study whatever you want. A private lender might insist on funding economically worthwhile degrees.
The real issue isn't the loan, but the entire system. The colleges have really jacked up the price of a degree. That's the real source of the problem. The interest rates are much closer to the market rates for capital.
I don't know that I'd use the word generous but they do have to advantages relative to other types of loans:
1. A relatively low rate for no collateral. It's never the 2.x% we got on mortgages during the brief window when mortgage rates are good, but compared to other rates you get showing up at a bank with no collateral, they're amazing.
2. Almost guaranteed approval for the above. Can you imagine an 18 year old walking into a bank with no credit history and collateral and walking out with a loan for hundreds of thousands of dollars? Sure, it may be a terrible idea, but a student loan is one of the easiest to get.
But it's for life right? You just can't bankrupt out of repayment, and since its in the US, missing a payment kill your credit score and prevent you from borrowing for anything.
In the 80s-90s in my country, we imported us-style loans, 'revolving credit', that were later called 'credits revolvers' because once you've taken one, a revolver was the only way out (not a joke, I know of 3 people who died in my village from this). We had to allow personal bankruptcy, and once the law was implemented and used, interest rates on those kind of loans doubled, and now they don't exist (although klarna and co are trying).
Fair enough, but going into debt for something that has (or will have) no value is an entirely different question.
When I was young and dumb (at least more dumb than I am today) and newly graduated from college, I took a $6,000 personal loan at my credit union to buy a computer workstation, top of the line, with a large monitor, laser printer, the works. This was in the early 1990s. It was stupid, and of course the credit union didn't try to talk me out of it. I convinced myself I would "need" it as I entered my professional career as a software developer.
Of course it never meaningfully contributed to my income, it was rapidly obsoleted, and I was stuck with the payments. But I made them.
Many people have student debts that are 10-20x that, or more. Minimum payments of thousands of dollars a month, and no ability to discharge them through bankruptcy.
You can take on a few thousand dollars of debt as a young adult, realize you made a mistake, grind to pay it off and chalk it up as a life lesson.
We are letting young adults today make mistakes that they will never get an opportunity to learn from, because they will be paying for it their entire life. It is vastly different from your example.
Well the upthread example was graduating with "tens of thousands" in debt, which really should be managable for anyone who completes a worthwhile degree. Again, that's a new car, something most people pay for in 4-6 years.
The fact that you can get easy loans into six digits to pay worthless schools for worthless degrees is a different problem. "Free money" never leads to wise purchases.
I'm not talking about worthless schools -- I'm talking about the Ivy Leagues.
Worthless degrees, yes, but why are we not holding our most prestigious schools responsible for charging outlandish prices for worthless degrees? They are the ones with power misleading young adults who maybe should know better but guess what, they often don't, and that's a mistake but not one that should ruin you financially for the rest of your life.
But yes, you are right that this is not the majority of student loan borrowers.
I hear you, but it's still not analogous. I admit to being less than precise in my prior response, specifically.
A degree isn't a car, nor is it a computer. Nor is it something that you buy. You pay for the privilege to earn it.
The problem is that, during that earning process, an institution has the power to stop you from proceeding with no representation. The only failsafes in place are there to protect the institution.
Specifics as to how this can occur are another deep discussion. The takeaway is that a 50k or 100k USD degree is fraught with inherent risk that, even if unusually realized, merits easier loan terms. Due to the core nature of what a degree is and how it is obtained.
The day that they federally neuter the power of colleges to determine student progress outside of the grading system, or better yet they give students an easy way to gain advocacy, is the day that I will more or less agree with you.
