College loans based on earning potential

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College loans based on earning potential

Postby Quasigriz » Thu Oct 20, 2011 8:06 am

I was thinking about this while reading about unemployment and people upside down in student loans. Should lenders be basing student loans on earning potential? It seems to make sense, but would require degree plans to be released to the lender. I'm sure there would be a dip in liberal arts, but there would be a surge in medical, technology, and engineering degrees.

Any thoughts?


Art history Degree: we will loan you a max of 20% tuition to a state university

Electrical engineering: we will loan you a max of 90% state, or 50% private university
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Re: College loans based on earning potential

Postby Vox Contra » Thu Oct 20, 2011 9:17 am

It might be a safer to hedge the bets that way. If the earning potential of the major is higher you’re more likely to get the loan paid back in a timely manner. But I think you’d also have to account for drop out rates. Fewer people stick with engineering, science, or math degrees then other kinds.
Bachelor’s Degree Completion Rates among Initial STEM Majors

I remember a hell of a drop off in the class size in the first couple years of engineering classes. I can’t imagine the other technical degrees were much better.

There’s also the matter of demand. If companies in the market are having a hard time finding qualified employees in a certain filed, it might be worth it to offer easier loans for those areas. Companies will have an easier time finding the qualified people they need, and the loaner will probably have a better chance of getting their money back because they know the graduates in that field are in high demand, so they’ll probably get a job.
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Re: College loans based on earning potential

Postby globyghost » Thu Oct 20, 2011 10:28 am

I would agree with this if earning potential were so easily determined, despite getting a double major in two liberal arts subjects myself. However, this summer I worked a minimum wage job at a chain store and most of the people there had degrees - a few had Master's. And while most of us were liberal arts majors, there were a fair number of people with Business, Engineering, and Computer Science degrees.

In this shitty job market, earning potential is really so low for everyone in college that it wouldn't make much of a difference what major you choose.

edit: the only majors I can see getting preferential treatment are the ones that are always consistently in need: vocational degrees. This means nursing, electricians, plumbers, etc. Not exactly as noble sounding as giving 90% to all future Wall St. execs, but it's pragmatic.
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Re: College loans based on earning potential

Postby exposno1 » Thu Oct 20, 2011 10:46 am

Who in their right mind would lend their own money to someone taking a huge risk on a low-probability, one-in-a-million career?

The proper answer: no one

The real answer: collectively, all of us have, quite foolishly, chose to do it ever day

So much of financial aid is driven by the Dept of Education (grants, loan guarantees), who acts like all degrees are equal. Then when the chickens come home to roost and we have a complete mismatch of skills to jobs, it gets blamed on everything from the lack of job training programs, immigration and the employers themselves. The solution, of course: they just need more money. :x


Finance is all about risk vs. return -- the two have to be commensurate. Political bodies are HORRIBLE at making such judgements and, worse, they do it with OTHER PEOPLE'S MONEY! :PrimalScream:
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Re: College loans based on earning potential

Postby Vox Contra » Thu Oct 20, 2011 10:49 am

globyghost wrote:I would agree with this if earning potential were so easily determined, despite getting a double major in two liberal arts subjects myself. However, this summer I worked a minimum wage job at a chain store and most of the people there had degrees - a few had Master's. And while most of us were liberal arts majors, there were a fair number of people with Business, Engineering, and Computer Science degrees.

In this shitty job market, earning potential is really so low for everyone in college that it wouldn't make much of a difference what major you choose.

Absolutely, you need to calculate the average outcome, and the spread of potential results. You can’t just look at the salaries of people with certain degrees, which I think far too many people do; that’s like calculating the odds by just looking at the winners. Those that drop out, those that graduate but can’t find work, etc. all affect the potential return on investment of the loan


edit: the only majors I can see getting preferential treatment are the ones that are always consistently in need: vocational degrees. This means nursing, electricians, plumbers, etc. Not exactly as noble sounding as giving 90% to all future Wall St. execs, but it's pragmatic

Screw noble, let’s start with pragmatic and see where it goes from there.
I’d consider loans to potential Electricians and Nurses to be worthwhile investments.
The upfront costs would be relatively low, the returns would be fairly reliable, and it would reduce the barrier to entry and help get people into some much needed careers.
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Re: College loans based on earning potential

Postby DBTrek » Thu Oct 20, 2011 10:49 am

And the "Fiscal Conservatives" find a new way to perform social engineering on a vast scale.
Bravo.

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Re: College loans based on earning potential

Postby Quasigriz » Thu Oct 20, 2011 10:53 am

In that case, what about only offering pell grants, and the like, for certain degree programs?

I would have no issues with a company like Microsoft offering to pay a top SAT scorer to go to school with an agreement to work for them for a certain time. It is a similar system to military schools. I've heard of the USAF sending folks to Harvard on scholarship.
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Re: College loans based on earning potential

Postby boethius » Thu Oct 20, 2011 10:55 am

DBTrek wrote:And the "Fiscal Conservatives" find a new way to perform social engineering on a vast scale.
Bravo.

:lol:

There are fiscal conservatives in this thread?

Take the government out of student lending, and let the lenders decide for themselves how much risk to take and based on what criteria. If lenders aren't forthcoming, let the universities with their multi-billion endowment funds put their money where their mouth is with regards to how valuable an education at their institution is and lend the students tuition money.
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Re: College loans based on earning potential

Postby DBTrek » Thu Oct 20, 2011 11:01 am

Or here's a radical idea . . . government educates its populace, and the populace goes out in to the world to compete in the free market with whatever skills they've obtained.
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Re: College loans based on earning potential

Postby boethius » Thu Oct 20, 2011 11:04 am

DBTrek wrote:Or here's a radical idea . . . government educates its populace, and the populace goes out in to the world to compete in the free market with whatever skills they've obtained.
That's what we have in public k-12.

For higher education, we don't have the gov't educating the populace. We have private companies educating the populace receiving payments from Wall Street bundlers/slicers and dicers of student loans which are guaranteed by government agencies like Sallie Mae.
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Re: College loans based on earning potential

Postby Vox Contra » Thu Oct 20, 2011 11:09 am

Quasigriz wrote:In that case, what about only offering pell grants, and the like, for certain degree programs?

I would have no issues with a company like Microsoft offering to pay a top SAT scorer to go to school with an agreement to work for them for a certain time. It is a similar system to military schools. I've heard of the USAF sending folks to Harvard on scholarship.

Several of the larger companies already do that.
I was offered a couple contracts along those lines when I started school.
Most of them aren’t worth it. You’ll usually find they pay below average wages for the time you’re locked in with them, You won’t se any raises or bonuses for the length of the contract, if there are any layoffs your name is usually first on the list, and if you get fired or quit before the contract is up, you have to pay back the full cost of the loan, sometimes with interest.
If you get a good deal with a good company it can really be worth it, but for most people it’s better to get low interest loans for the amount you think you can pay back and work part time or during breaks to cover the difference.
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Re: College loans based on earning potential

Postby DBTrek » Thu Oct 20, 2011 11:14 am

You guys sound like you have an excellent plan for myopically focusing on what's working right now, and a lousy plan for any sort of innovation or adaptability for future circumstances. Great way to make sure your country is never in the lead.
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Re: College loans based on earning potential

Postby Quasigriz » Thu Oct 20, 2011 11:21 am

DBTrek wrote:You guys sound like you have an excellent plan for myopically focusing on what's working right now, and a lousy plan for any sort of innovation or adaptability for future circumstances. Great way to make sure your country is never in the lead.
Kudos.
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I suppose not being the lead in Middle Eastern Basket Weaving studies or Marine Mammal Copulation studies would be acceptable.

A lot of the folks at OWS are complaining about student loans. Plenty of people do not go to college and do not incur these huge debts; sometimes the even end up hugely successful.
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Re: College loans based on earning potential

Postby DBTrek » Thu Oct 20, 2011 11:26 am

Quasigriz wrote:I suppose not being the lead in Middle Eastern Basket Weaving studies or Marine Mammal Copulation studies would be acceptable.


More like the rest of the world is moving to automobiles, but Quasigriz's USA is paying top dollar to graduate horse trainers, carpenters and veterinarians because the horse&buggy trade has been so damn successful for the last 100 years.

A lot of the folks at OWS are complaining about student loans. Plenty of people do not go to college and do not incur these huge debts; sometimes the even end up hugely successful.


My degree is in history, I've worked in video editing and high-level tech support since graduation. Innovate, expand, succeed. Are we going to pretend that if all the OWS protesters had MBA's they'd all be gainfully employed right now?
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Re: College loans based on earning potential

Postby Quasigriz » Thu Oct 20, 2011 11:51 am

DBTrek wrote:
Quasigriz wrote:I suppose not being the lead in Middle Eastern Basket Weaving studies or Marine Mammal Copulation studies would be acceptable.


More like the rest of the world is moving to automobiles, but Quasigriz's USA is paying top dollar to graduate horse trainers, carpenters and veterinarians because the horse&buggy trade has been so damn successful for the last 100 years.


I was actually saying the opposite.

A lot of the folks at OWS are complaining about student loans. Plenty of people do not go to college and do not incur these huge debts; sometimes the even end up hugely successful.


My degree is in history, I've worked in video editing and high-level tech support since graduation. Innovate, expand, succeed. Are we going to pretend that if all the OWS protesters had MBA's they'd all be gainfully employed right now?

I suppose that I, like others, am interested in the demographics of the OWS crowd. If they are college educated, what is their area of study? Video editing doesn't require a big name degree (although I'm sure NY film school and the like would object), but with modern transitions performed by computer, it's easy to see how the skill-set can transfer (hell, I used huge panasonic video editors and ran transitions of an Amiga, but that was long ago). The tech community values experience and certifications over degree anyways; unless we're talking designing microprocessors, then electrical engineering tends to prevail. I majored in compsci, minored in history. I worked retail for 10 years before finishing school and finally getting my first real sysadmin job.
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