What a great read. This resonates with me. At one point in my life I was desperately close to homelessness. At the time I was lucky to still be enrolled at a university and could therefore easily take out as many loans as I needed. It was a horribly risky gamble I wouldn’t wish on anyone, but without going into more details of my life story I barely managed to graduate and find a successful career. I was able to pay off all that debt (nearly 150k) in 4 years. I recognize soberly that my story is the exception and far from the rule. I had a lot of luck. But from that experience I can say nobody should have to experience this. Especially not in the most wealthy nation in the history of the world.
- edit: I just want to add the experience nearly broke me, to the point friends and family barely recognized me and the looks I remember in their faces still haunt me. That transition after graduating and starting to make money to being a person who could interact with others who never got so close to total disaster was just as hard.
Please be kind. You just don’t know what someone has been through.
May I ask for how long you took that loan? I’m from Germany and a lot of people live here from around $15 000 per year. 150 thousand seems like such a big amount, but I guess life is also more expensive in the US. I just want to understand, because I come from a different perspective.
Unlike in Europe, in the US going to university or college requires huge amounts of money and usually require students to take loans. And unlike other types of loans it is nearly impossible to declare bankruptcy for student loans.
There is a great summarising it:
https://youtu.be/pVKEsiNMPNc
That makes it sound like [divorce + medical crisis] would maybe have "reset" their finances, but not kept them in on the street for so long if it hadn't been for the student loan which couldn't be discharged through bankruptcy.
There are student loans in virtually every country, including Europe, and I'd say they're quite commonly used. The difference is whether they're required to pay for tuition or not. For example, in Norway public universities (which are most, including the best ones) are tuition-free.
In countries like the Netherlands, there is tuition, but heavily subsidised. Fees are about 2k per year, and low (and partially to middle-income) households get a government stipend that is more than double that fee per year.
In short, people in these countries have to pay living expenses, tuition is pretty much covered. And a lot of these countries are quite small and have people living near the university, with decent public transportation, which is often free for students as well. As such lots of students live at home instead of on-campus, moving out for lifestyle reasons as soon as they can (often taking out loans to supplement a parttime job), rather than for the logistics of having to move to a place near the university.
In the US there's a lot of subsidies, state programs, scholarships etc as well. But many people still end up paying way more, especially if they're going out of state. And there's lots of people who end up having to move city to study somewhere, which means paying for room and board are very much a requisite part of their studies.
As such the loan amounts are nowhere near as large. Second, loans tend to be government issued, the cost-of-capital essentially tracking the interest on state bonds (e.g. treasury bills in the US) with a cap of 0%. This means in the Netherlands for example interest rates for student loans have been 0% for years and will likely remain at 0% for many years. This presents a wildly different outlook for students because borrowing $30k today isn't going to turn into having to pay back $100k over the course of the loan the coming decades, but just $30k, which is depreciating due to inflation in real terms over time.
There is literally no tuition in Sweden. The loans are for rent and general cost of living. You can have literally zero means and still go to university in another city.
What's more, the interest rate is practically free and you can take 25 years to pay them off if you want. Students are not seen as desperate marks to be exploited.
When you say literally, what do you mean? Almost or absolutely? Because I get confused, since, literally, literally doesn't mean literally with some people, literally.
Yes, so for EU citizens, there is no/low tuition in the EU, making the statement true.
This works this way for most social programs in most countries. E.g. to can't migrate to a country and then claim unemployment benefits. That doesn't mean the statement "the country has an unemployment program" is false.
Unemployement is something different, you can't compare apples to oranges. Nobody is paying for getting unemployment, you're not eligible at worst.
There are dozens (maybe hundreds) of thousands of people paying for universities in the European countries with public schools (most of paying students are of second/third-world background in a country that is acting passively aggressively to them because of their non-resident/non-citizen status [that causes issues e. g. with banking services], btw), and many of them in Sweden, that's why I feel the statement is false. Also note that I'm not judging, merely stating a fact; I don't see anything wrong with both funding approaches, and think they should be combined (like in Czechia).
And the UK. Although it's not a normal loan in that repayments are linked to income and there is a promise that it will be "forgiven" at retirement (which I'm a little skeptical of)
Not even retirement, 30 years after graduating. I do wonder how the government managed to sell so many of those loans on when I expect a small minority will ever end up getting fully repaid, given the high-ish interest and earning threshold for starting repayment.
The UK loans are actually a good deal if you really understand them, which students here inevitably don’t. It makes demanding government to pay for tuition here pretty abhorrent imho.
I know a lot of working class/blue-collar families here, and talking with them, it really becomes clear how incredibly selfish and unreasonable it is to expect their taxes to buy someone wealthier than them an education that they themselves are denied by virtue of being raised in harsher circumstances.
I'm entirely incapable of understanding how a UK SLC "loan" can be considered a loan in the conventional sense of the word when it seems to have literally no characteristics of a loan, and every characteristic of a tax:
* You only pay it when you are in employment and earning money (with a minimum salary for repayments to be taken);
* The repayments are calculated as a function of your taxable income;
* The balance isn't discharged by bankruptcy;
* The balance isn't considered by lenders when assessing your suitability to take on "real" debt.
As far as I can tell, it's a graduate tax (on those who took a loan) for all intents and purposes.
I see comments from students talking about being "crushed by debt" as a result of taking an SLC loan, and I just can't work out where this perception comes from: yes, it decreases your take-home pay, but since there's a minimum salary threshold for payments to be taken, it's never going to leave you destitute.
I think that the modern loans are a far less amicable deal than I had just a few years ago. Interest rates far higher despite an incredibly low rate environment.
But. The repayment thresholds and the loan forgiveness period do massively reduce the onerousness, especially on those in lower paid roles who would otherwise never repay. My main complaint about the system is really how it drags on the middle.
The successful graduates pay off their loans in 6-7 years, or less. If you're earning 40-50k, you'll take more like 20 years to pay off the loan which feels like a long hard slog. I still think graduate tax would have been the right call.
1. The amount that you "borrowed" is a fake number, though, with no correspondence to the true cost of the course and is non-existant for e.g. Scottish students in Scotland.
2. Your salary will (is expected to) inflate; the repayment threshold currently does not, so the "time value of money" has something to say about how much you repay. Someone whose salary remains constant on the equivalent of £40k will find their repayments an increasing burden.
The repayment threshold is expected to rise with average earnings so someone on an equivalent salary of £40k would be expected to pay back less in real terms than that calculation if wages rise above inflation.
The amount you borrow is not a fake number, whether it is related to the course cost or not, just as the price of a car is not a fake number even if it was cheaper to produce. It also includes literal cash payments to you.
What £ of tax would the working class family contribute towards university education (assuming you accept this paradigm of tax and spend)? Back of envelope calculation suggests income tax collected from a median family would be £50 per year.
Meanwhile, I know plenty of working class/blue-collar families who believe that debt is an unmanageable risk that they should reject if at all possible.
Their children take that to mean that they absolutely shouldn't go to university, no matter how capable they are.
> Back of envelope calculation suggests income tax collected from a median family would be £50 per year.
Back of envelope calculation is definitely wrong.
I'm not necessarily disagreeing with you, I'm just saying that £50 figure is definitely not right, without doing any calculation. (OK sure - 50/0.2 = £250 taxed at basic rate above personal allowance. Which this year I think is £12k5, and median household income is surely above £12k75.)
Ah apologies, I was answering my own question: I meant marginal tax required to pay for university level education in place of current student loans system.
“ What £ of tax would the working class family contribute towards university education”
Is not really fair to the issue. It’s not a cost for university education, because it’s not open to all - there are gatekeepers - and those from underprivileged backgrounds have very little chance of being accepted to the most prestigious institutions, so it’s unfair to expect them to pay for it, is essentially my point.
My point is that people from underprivileged backgrounds realistically don't pay any different amount in tax and are only further removed from access.
To repeat myself: "Their children take [accruing debt] to mean that they absolutely shouldn't go to university, no matter how capable they are."
Tax pays for plenty of things that working class people don't use; it also pays for plenty of things that working class people do use, that other people are paying for - and the latter category should include university education. Tax is an agreement that we find these things valuable to pay for, as a society. Not everything paid for in taxes has a direct benefit to everybody.
"Tax is an agreement that we find these things valuable to pay for, as a society."
But we don't agree. A lot of people are affronted that as they see it they're being asked to, in essence, fund a high quality education for wealthier people's kids that their own kids can never have access to.
Whether they're right or wrong (and I've yet to see evidence that they're wrong), that's their view. And there are a lot of them. Which is why Clegg could never sell it to the electorate back in the coalition days.
If we all took the point of view that any government spending that doesn't directly and immediately benefit us personally should be cancelled, no government spending would be likely to happen at all. It's an inherently right-wing/individualist position.
I think this is an issue of right-wing media spin, rather than beliefs that working-class families innately hold. (Also since my experience of working-class families' views is generally the opposite of your claim.)
There is a lot more egregious government spending distribution problems than this one, which get ignored. In general, government spending benefits the middle classes (and upper classes) far more than it does the working class, and that's true in other areas more than it is in education.
From https://www.tutor2u.net/economics/blog/does-uk-government-sp... e.g. "The wealthy also drive three times as many miles as the poor. This makes them big beneficiaries of spending on roads, worth £8 billion a year. Poor people make up ground elsewhere: they use buses twice as much. But bus subsidies are smaller."
...meaning they end up pretty small: my debt was about 250 000 SEK -- very roughly $25k -- after 5 years of university. Combined with the monthly stipend that everyone gets, I was "self-supporting"; my parents didn't have to (and wouldn't have been able to) pay any money out of pocket for my education or living expenses during that time. And now I pay around $1k total on that loan every year. I could pay it off faster, but the terms are so good that I'd rather use it to lower my mortgage, or invest it.
Thanks to this system, I got the opportunity to do what I wanted, and society gets another well-paid software engineer that can pay lots of taxes. Win-win!
(Edit: corrected debt from 300 000 SEK to 250 000 after checking)
Father of 3 here, one recently graduated and one about to start US college.
With reasonable preparation, college is very affordable. Scholarships are easily obtained with a good ACT or SAT score. Both of these are well documented, a few months of self-study practically guarantees a good score.
My experience has been that good preparation puts out of pocket costs below $10k per year. (I think that's actually on the high side.)
> Scholarships are easily obtained with a good ACT or SAT score.
For the children of people that read Hacker News, I could see that. For normal American kids? No way. Not even close.
The average american kid is not going to be able to get an SAT or ACT score good enough to get a scholarship. It's just not going to happen. You're vastly overestimating how smart and committed they are.
How much effort do you expect a kid to put into something that has no immediate benefit and no guarantee it'll ever pay off? To get to that level of delayed gratification requires a very special sort of upbringing.
You raise an excellent point. My kids (and others like them) are being raised in a 2-parent household. We encourage the kids to study, and help them where needed.
It's a form of privilege, but I don't feel guilty about it. We take part in programs that help other kids outside the family (including after-school homework help for ELS kids). IMHO, we all should become 'privilege factories', helping first our own kids and then other kids. It advances quality of life for everyone involved.
> Scholarships are easily obtained with a good ACT or SAT score
Ha ha ha. Having gone to college and recalling some folks I met, and listening to some stories from a friend who is a high school teacher at a public school, I laughed hard at that
How well can a person live in Germany for $15,000? A person in the US could live on that much in an apartment with multiple room mates in a city with a low cost of living, but it’s not much of a life. You would be eating Ramen noodle every night (and not the good kind).
Wow, that's super cheap! Here in Grand Rapids, MI, USA (generally considered a low cost of living area) an unfurnished apartment in not great parts of town is on the order of $800/mo, plus about $150/mo in utilities, depending on how cold you can tolerate in winter and how hot in summer, i.e. double the price.
Now, actual studio apartments command a premium here, and anything that small is hard to find, you'll more likely find an 80m2/800 sqft converted space in the basement of someone's house for that price. Also, housing is cheaper the farther you go from downtown, and I'm not sure how good public transit is in Leipzig, but it's pretty car-centric here. We have a bus system, but that basically means an extra hour anywhere you want to go, which is a massive pain when you're already working 2 30-hour-per-week jobs.
Not sure about Leipzig (not the OP here) but in a sort of comparable (ish, Leipzig is much larger but also in the east of Germany) place elsewhere in Germany I paid about the same like 20 years ago. I had the choice of 2 bus routes to get to university (one was a special university Express bus running between the two campus locations) and I could walk to one in about 10 minutes, the other around 20 minutes. Town of about 150000 ppl and 15000 students.
In general public transport in cities in Germany is good. You may have pockets of town where you can't get from one side to the other without going to the center first but if you're in a reasonably small city even that doesn't take you forever. And if you have to cross town you can do it easily because the transit system is not only made for rush hour traffic to the center in the morning and out in the evening. You can go either direction at all times, even on weekends. Not all jobs are downtown either (though many are). You have offices all over the place too. In Frankfurt for example I would take the train (5min walk) to central station (maybe 20 min ride) then take the "S-Bahn" out to the other end (another 10 min or so) of the center to an office building right in the middle of lots of apartment buildings (3-4 storey max).
> Especially not in the most wealthy nation in the history of the world.
Everyone keeps repeating this, but it's not true. Switzerland beats America by mean net worth. And look at median... whoa 22.
By government deficit (and likely household, corporate, etc), I bet we're #1 in all categories. The truth is, America is great at spending money. That doesn't make it wealthy, quite the opposite.
Sorry, I don't mean to be mean or pick on you personally. That experience must have been terrible. Normally I'd let the data speak for itself, but I will reveal my reason for posting it is because I don't think we give a fair shake to people like yourself.
I think the rationale for ignoring per-capita is that you're talking about the wealth of a "single entity", the US. And, well, yeah... ok, I guess (ignoring the fact that, as you point out, GDP is more like income than money in the bank).
I agree that looking at it that way is meaningless for the purposes of figuring out whose populace is the financially healthiest, but... that's what people do, for some reason.
That's genuinely understandable. My worry is that it was true back in the days of the boomers, and it has been so ingrained in us that we didn't even notice it shifting, and now lack of awareness of this fact causes a kind of cognitive dissonance preventing us from fixing these issues, not least of which the OP.
We've squandered our wealth for ever-increasing cash flow, and by the time we're done I'm worried that the country will be a empty hulk.
- edit: I just want to add the experience nearly broke me, to the point friends and family barely recognized me and the looks I remember in their faces still haunt me. That transition after graduating and starting to make money to being a person who could interact with others who never got so close to total disaster was just as hard.
Please be kind. You just don’t know what someone has been through.