The Real Student Loan Problem

US News says ONU is "more selective." But with an 81% acceptance rate, "more selective" than whom?

This weekend's New York Times had a story on the crushing debtloads of college students, and predictably, it managed to showcase every single one of the typical predatory loan tropes: the I-didn't-realize-how-much-my-loan-payments-would-be-after-graduating-from-a-4th-tier-private-college liberal arts major; the directionless student who takes six years to graduate; the mediocre student who assumed he/she would be rewarded with a lucrative job for graduating from any college at all, etc. Case in point:

“As an 18-year-old, [Ohio Northern University] sounded like a good fit to me, and the school really sold it,” said Ms. Griffith, a marketing major. “I knew a private school would cost a lot of money. But when I graduate, I’m going to owe like $900 a month. No one told me that.”

Look, bitch, you owe $120,000. You have ten years to repay on a standard repayment plan. That's $12,000 a year for which you're on the hook...BEFORE interest! I know you must not have done well on the quantitative section of the SAT, which is why you're in this situation in the first place, but seriously. There are third graders who can do that math.

Now, leaving aside the question as to whether college is overpriced (it is, because student loans are too easy to obtain), that's not to say that there aren't smart people at Ohio Northern, or that it's always a bad choice. But students seem not to understand the concept of expected value. The valuation on Ohio Northern is pretty appealing if they give you a full ride. But if you're going to need a job at Goldman Sachs to afford your debt burden, you'd better damn well go to a school at which Goldman Sachs recruits.

So I don't have much sympathy for the "I paid $26,266 a year to go to Bob Jones University to major in psychology and now I can't repay my student loans" contingent. That was a stupid decision, and nobody should have given you money to go in the first place. I'm sure a lender would love to deny you based on your piss-poor earning potential, but then they'd violate fair lending laws and then have to pay like a million dollars in punitive damages so why not just give you the money, because maybe your parents will accidentally buy a lost Picasso at a yard sale and then they'll get paid back.

I am troubled by the tacit assumption that if consumers are more informed, they will automatically make better decisions. Some most certainly will. But it's hard for me to believe that a student - no matter how young or unsophisticated - can look at $120,000 loan balance and not realize that that would be an onerous debt burden. I think the real issue is that people uniformly overestimate their own prospects. For example, I thought I would easily crack the top 10% of my law school class through a strict daily regimen of drinking and playing video games. I may have very well finished in the BOTTOM 10% were it not for a couple of people who drank even more than I did.

So, my proposal is that every school should have to report the average salaries of all its students in every major. You'd get a slip of paper in your admissions packet that says: "Our graduates who majored in Psychology in 2012 averaged a starting salary of: $15,000. Sixty percent of them are unemployed. Odds are, you will be too."                 

eBay Bidder Behavior: Stupid.

I'm watching an item on eBay (which, despite my hatred of it, is unfortunately still the best site from which to procure rare and/or unusual items) that went up two days ago. With more than 4.5 days to go, six fucking morons have already placed 27 bids on it, sending the price soaring into the stratosphere.

Now, I don't care so much about the price; if that's what the market will bear, that's what the market will bear. However, I simply don't understand the obsession with early bidding wars. There is absolutely nothing to gain by placing an early bid on an item, but a lot of negatives:

1. You signal to other buyers that you are interested - Even the hint of competition will bring out some interest, especially if it is perceived as a sort of validation. If I saw that a pristine prewar Martin guitar had zero bids on it with five hours remaining, I would assume that there was something wrong with it that other people knew about but I didn't. I probably wouldn't bother bidding, truth be told.

2. You tie up money until the auction's over - You're on the hook if nobody outbids you, which is good - until someone puts up a Buy-it-Now listing for the same item, at a lower price. Or your car's transmission falls out and you need to pay for repairs. Oops.

3. You raise the overall price by getting into a one-more-increment bidding war - It's the "in for a penny, in for a pound" theory. Theoretically, proxy bidding should be pretty efficient if people truly have a hard cap on the amount of money they're willing to pay. The trouble is, people are always willing to add a nominal amount to their "maximum." So if you put in a leading high bid of $150, your opponent will not bat an eye throwing in a new leading bid of $151. And hey, you just bid $150, what's two more dollars to win? Rinse, lather, and repeat. That's why you have to snipe. The only way to end that stupid game is to not give your opponent a chance to counterbid.