A worthwhile petition for those who care

Making student loan interest tax-deductible would increase the attractiveness of taking on student loan debt. In the end all you accomplish is students taking on even more debt and higher education costs resulting from shifts on the demand side of the equation. It's even questionable if the tax deduction helps at all since the income of recent grads is relatively low on their first job.

Agree. Terrible idea. Why not just petition to force schools to lower tuition?

What's the point of a tax deduction for interest paid to the US government when we could simply reduce the interest -- e.g., to something approaching the US's cost of funds or the rate the US charges banks, both currently less than 1%?

Currently, student loan borrowers pay more in interest charges to the US than they do to the educational institution. That's like a massive excise tax to discourage education.

Senator Warren's proposal to tie the student loan interest rate to the rate for banks, although limited only to one loan program and only for one year, is a more straightforward way of reducing the massive upward redistribution of wealth here. A tax deduction, in contrast, gives a lower effective rate to higher income earners -- what's the point of that?

Re RS & Matt's apparent belief that cheap loans make education more expensive. It doesn't work that way. Education actually costs money and the number of people willing to work at universities for free is limited.

We've been shifting the costs of education from society -- the primary beneficiary -- to students and their parents for a generation. It has not reduced the cost of education at all (any more than the similar attempt to shift the costs of medical care to the sick reduces the cost of medical care). It has, however, radically increased sticker prices and hurt quality, especially at state schools and at private schools forced into wasteful zero-sum competitions for rankings and the limited pool of paying students. This, in turn, has reduced economic mobility and is, most likely, a key part of why the US has lower slow growth and higher inequality than when we saw education as a social good, not something to be squeezed at every opportunity.

Financeguy, that is absolutely NOT what I'm saying.

What I'm saying is why not get to the heart of the problem (high college costs) rather than treating only a symptom (high interest rates for college loans).

A good education is one of those things that should be available to everyone regardless of that person's financial resources. We'd be better off giving out-right grants than encouraging more debt.

It is also clear that someone in their teens is not yet capable in most cases of making good judgments here. Seeing someone load up on six figures of student loan debt to finance degree in social work is asinine, but banks and government are all to willing to lend considering the special status student loan debt has. Almost impossible to extinguish.

I have a problem with the vast breadth of programs that are considered "education" under these loan programs, ALL for-profit institutions (including de facto for-profits, if unofficially so) participating, par and the breathtaking lack of standards in determining which individuals are considered student-ready.

So why exactly is this posted on a RE chat board under "sales"?

Because college loans negatively impact an applicant's financials in their co-op packages.

Alan is right, of course, that there is no reason why for-profit education shouldn't play by market rules, with no government loans or government insurance at all. In any event, little of this is education; the government's role ought to be to stop the scam, not finance it.

Matt is wrong, however, to think that the "heart" of the problem is that education costs too much. At current 6.9% or 7.8% interest rates borrowers pay more for interest than for education. So interest is the biggest cost.

But the real fundamental problem is that education is an expensive, vital, public good that ought to be paid for via taxes, like wars and highways and fire departments and meat inspections and medical care. Our attempt to force students to pay for it failed. We ought to go back to the successful system of the first half of the last century when we -- although much poorer as a society -- managed to provide higher education for free in NY and CA and many other states to all who qualified.

The effect on real estate is pretty straightforward.

Free higher education would make the NY economy grow faster. Assuming that we don't decide to bring our mass transit up to 3rd World standards,that is likely to drive Manhattan land prices up still more.

Conversely, continuing the current trend of starving higher education and burdening young people with huge loans will lead to lower economic growth and higher inequality. Demand for high end apartments and low end shares will each increase, at least in the short run. What supply will do is unclear.

"Matt is wrong, however, to think that the "heart" of the problem is that education costs too much. At current 6.9% or 7.8% interest rates borrowers pay more for interest than for education. So interest is the biggest cost."

No I'm not wrong at all.

Interest rates and loans have nothing to do with the "cost" of education, which has skyrocketed by 300% since the '80s.

A lot of people are wasting time in college that shouldn't be in college. We need more trade / vocational schools teaching skills.

Lower borrowing increases other costs. One only has to look at the rise in tuition significant above the cost of inflation for decades now.

As for this proposal, it probably would impact very few people. You'd have to be itemizing your deductions and in a higher tax bracket for this to matter, so it's actually a proposal disguised for all that perhaps only benefits lawyers, bankers, and doctors.

"A lot of people are wasting time in college that shouldn't be in college. We need more trade / vocational schools teaching skills."

Amen one million times over!

A great deal of for-profit institutions prey off students. Student loans are the great enabler in this scheme. Not so much a problem with 4 year colleges, but tons of two year and schools offering certificate programs taking advantage.

Agreed.

And in the guise of trade and vocational alternatives to the traditional university pathways, they offer ridiculous hyper-focused credentials that are unwanted by businesses and useless for entrepreneurship. Paralegal Studies. Digital Audio Production. Internet Trolling. Obsolete Programming Languages. Urban Animal Husbandry and Sustainability.

Community, Junior, and all two-year colleges should be ineligible for any aid, except in rural areas where the nearest college of any sort is more than 125 miles away. Associate degrees, "executive", and certificate programs likewise should be ineligible for aid of any sort.

Internet/Distance learning: total farce, very efficient money-maker.

On and on.

Alan, don't forget chef schools and cashier training institutes. But about junior colleges, I wouldn't be so quick. The idea behind those was that kids not ready for campus life and not sure where they were going would live at home with mom and dad and commute to classes and only go on for the bachelor's if it seemed like the way to go for them. Nowadays, enrollment at junior colleges has swelled because of the competition for spots in the State-funded 4-year colleges. I don't agree with the notion put forward here that there are too many people going to school. I do agree that most schools are pure, absolute 100% crap, though.

"I don't agree with the notion put forward here that there are too many people going to school."

I do. So many marginal students who struggle to get a bachelor's degree at lower-tier colleges and universities -- for what? They weren't really academic material, and now they're not really professional material, either.

They would have been better served learning a trade or becoming a cop.

And if you have two minutes, you can listen to this chick in pigtails talk to her brassiere about American Campus Communities, a for-profit "privatization" outsourcing of college residences.

She doesn't quite make it clear that these are largely on-campus residence villages, built on land provided by the universities, and completely integrated into the universities' residence selection process, on par with all other dorms. Financial aid to cover costs.

And that most universities now REQUIRE their students to live on campus in overpriced housing, at least freshman year, and sometimes more/all 7 undergrad years.

http://youtu.be/jssHI3p1iso

For many people a lower end bachelors degree is a terrible option. After graduating they are not any more employable. A good system would steer people with aptitude toward the appropriate trade school. There are plenty of auto mechanics, plumbers and electricians making more than glorified clerks working on wall street.

Also consider this, in the absence of student loans, a number of students would opt for State, or City University and possibly live at home in the mean-time saving thousands of dollars.

Not saying an MIT or Wharton degree doesn't have it's place, but it's not for everybody.

I'm not a big believer in so-called vocational schools. Cops are trained, paid while they're training. Likewise firemen. Law firms don't hire paralegals from Paralegal Training Institutes. Going to chef's school doesn't get you a career as a chef. Once upon a time getting an education was about improving oneself, not about getting a job. This has gotten all upside-down.

"auto mechanics, plumbers and electricians" ... the best of them learn their trades by working as assistants to people in those trades.

Most post-high school trade-school programs are shit, offered by for-profits and the community colleges that want their share of loan money.

But to the extent trade school is useful, that was the advantage to the "tracking" approach to academic OR vocational high schools a couple of generations ago. *At the terminal high-school level.*

They could also go to non-accredited free or cheap night school as adults to learn all sorts of subjects that engage their extracurricular talents and to learn how to be more refined people.

A lot of chefs who went to the French Culinary Institute would disagree

lowery beat me to most of my salient points, while I was slowly and clumsily typing. I should have gotten my associates degree from Berkeley Business College.

lowery beat me to most of my salient points, while I was slowly and clumsily typing. I should have gotten my associates degree from Berkeley Business College.

And a certificate in Pushing Button Once Only.

By "learning a trade" I'm not promoting one of those for-profit schools.

I'm suggesting traditional apprenticeships.

what is your current profession?
I'm an out-of-work hairdresser.
An out-of-work hairdresser. In what way does that qualify you as an expert in automobiles?
It doesn't.

alan, just because you didn't get your Associate degrees in those things doesn't mean you can't open your own school for them - I'll teach auto mechanics and you can teach pushing buttons once and we can steer our students to low-cost 18% student loans - dumb thing said by enrollment officials at our new school: "There's a petition going around to make interest on student loans tax-deductible."

I think this is just additional evidence that upperwestrenter is stretched financially and wants more subsidies.

Finance guy as usual is spouting theoretical gibberish . There's no link between the increase in student loans and college costs rising ? he can't be serious.

Btw, finance guy said that the "bubble" in NYC would cause rental units to be sold, exactly the opposite that has occurred . Period .

data source?

your asshole.

C0C0, SE's biggest fraudster and liar, questioning someone's asshole.

really?

now?

C0C0, why don't you explain how greater borrowing at low cost for more people is divorced from decades of rising tuition significantly in excess of inflation?

ah...you always forget.

when do you post as reallynow and when do you post as greasy dale?

why?

C0C0, so you can't explain? Did you even go to college?

stupid little person.

remember the rules.

You can't? You didn't?

rethink your position and then get back to us.

You are incapable of thought, or just defending your position?

you're slipping.

You aren't sure?

reallynow?

student loan and credit card interest used to be tax-deductible - not sure whether eliminating the deductibility had any effect one way or the other on people's debt, but student debts were not as high 30 years ago as they are now, so probably neutral

Most people who are in credit card debt aren't in the tax brackets where a deduction would be relevant. But essentially, it would provide a subsidy for more wealthy borrowers vs. needy borrowers.

Credit card debt is one step away from pay day loans.

But C0lumbiaC0unty seems to be a fan of this proposal.

http://www.slate.com/blogs/moneybox/2013/05/20/brookings_slams_warren_student_loan_proposal_but_it_s_fine.html

http://www.huffingtonpost.com/news/elizabeth-warren-student-loans

Signatures needed by June 15, 2013 to reach goal of 100,000
98,258

Total signatures on this petition
1,742

I don't know why the interest rate on student loans aren't reduced. Can anyone tell me. Thanks.

Because they are fairly high risk, particularly going forward. With huge education costs and reduced employment possibilities lenders are getting what they can get to offset the increased possibility of future default. Lenders are vultures, often, but I'm not sure this doesn't make some sense from an underwriting perspective, at least to some extent.

aboutready = vulture
I like it!

http://www.dailydot.com/politics/blind-captcha-white-house-we-the-people-petition/