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Aaaaahhh…. shadaaaap! And a plan to reform the student loan system

Student loans suck. I’m not going to bother going through all the reasons they suck, as plenty of people have done that before me. I just paid mine off, because I despised paying that crack whore, Sallie Mae, every month.

Nevertheless, I just want to slap some people when they whine about their student loans. Kelli Space, age 23, for example, should get a taste of the back of someone’s hand.

Kelli owes about $200,000 in student loans. She borrowed that much money to get a bachelor’s degree from Northeastern University. Now that she realizes that she is lifepwned, she launched a begging site trying to raise money to offset her debt. (here). Gawker wrote about it here. Kelli wrote to them:

The severity of my situation goes a bit deeper than “I owe this money, help me” – I am actually forced to live with my parents (forced = I am lucky! But…) as the monthly payments for just my private loans are currently $891 until Nov 2011 when they increase to $1600 per month for the following 20 years… attached is my payment plan. I also mentioned I have a job – which is great! And I probably have my college education to thank for that! Except there is still no way to make these monthly payments, and live on my own as a contributing member of society. Neither of my parents, nor I, really knew how this would pan out — unfortunately — and now that I’m here, I see no real light at the end of the tunnel. (source)

I can say with absolute certainty that there is NOTHING that you could possibly learn at Northeastern University that is worth $200,000. I’m not down on Northeastern. I can’t imagine a BA from any university on earth that is worth $200,000. But, apparently she borrowed $200,000 to get a degree in … wait for it … sociology. Oh, yeah, there was a study abroad program in that little financial time bomb too.

Look, someone has to study sociology, so I won’t shit on that discipline (I respect it actually) … but she couldn’t have gone to some SUNY school (I think she’s from New York) and gotten in-state tuition? Was the study abroad program really necessary? Or was it like every other study abroad program — an overpriced vacation?

Naturally, I have neither sympathy nor respect for Ms. Space. But, lets not blame her all by her lonesome. She got taken for a ride.

The student loan system sucks, and it needs to be reformed. There’s no goddamned way that her education was worth a quarter of what she paid for it — she got ripped off. You know why? Because the school knows that it can sell its bullshit “education” for $200,000. Why? Because the people buying this garbage are 18 year old idiots. You tell a kid “sign here” and she does. To make it worse, the debt isn’t dischargeable in bankruptcy, so she’s stuck with it.

I agree that student debt should not be dischargeable in bankruptcy. But, here’s my modest proposal for how we fix the system:

  1. Student loans must be co-signed by the school itself — if the student does not pay, the school is financially responsible for the debt.
  2. The school can still sue the student for reimbursement – no discharge in bankruptcy.
  3. If you have a professional license of any kind, doctor, lawyer, etc., you lose it if you default on your loans.

Do you think that Northeastern University would ever have let this girl borrow $200,000 for a fucking sociology bachelor’s degree if they knew that the $200,000 was going to come out of their ass? Hell no. She’s never going to be able to pay that back with a sociology degree — not unless we get Weimar Republic style inflation, which might make the balance meaningless.

Under my plan, you would likely find schools simply loaning the money themselves. Why put the extra friction in the machine that an outside usury brings to the equation? The problem with higher education is that guaranteed student loans create an imbalance in the market. Every other loan market is prone to bubbles and errors (just look at the recent housing debacle) but corrections do happen. Loans to 18 year olds for life-crippling debt numbers are bad enough, but loans of this magnitude with zero evaluation of the credit worthiness of the person (or the endeavor) are insane.

If the school doesn’t want to co-sign the loan, students could still be free to go to banks and beg for loans. However, just like any other business loan, the student would need to demonstrate that the loan is a good investment. If someone came to me and said “I want to borrow $60,000 to study engineering at the University of Massachusetts,” that might be a good investment. If that same person wanted $200,000 to study art history at Bennington, well … I hardly think that would be a prudent use of my money.

It would seem that this plan would cure a good number of ills in the legal profession as well. Every law school chases the U.S. News Rankings like a dog digging for a shit-filled diaper in a trash bag. Then, every year, law students and law schools scream about the rankings and say that real employment figures should be factored in to the rankings.

If the school was on the hook for the loan, U.S. News would wind up where it belongs — recycled into toilet paper. Schools would be pretty damn committed to getting their students jobs, and those that were not would dry up and die under the blistering heat of the free market. We would likely see 25% of the law schools close, and most of those remaining open would be forced to drop their tuition. Law professors might suffer a little bit of a pay cut, but let’s face it, 75% of the full time profs are worthless anyhow. The legal teaching field would likely start to embrace more adjuncts – meaning more people who do the thing that they are supposed to be teaching.

Everyone of any value wins.

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