Let Them Eat Teslas 461
theodp writes "If you're a bright kid who wants to prepare for the 21st century workforce (PDF) by studying engineering at Purdue, the government will help your parents pay the $100,000 or so tuition tab with a 7.9% interest loan (plus 4% fees) that's likely to be non-dischargeable in bankruptcy and paid back with after-tax money. If, on the other hand, you want to buy a tricked-out $100,000 Model S, Tesla has teamed up with the government, Wells Fargo, and U.S. Bank on what it calls a 'Revolutionary New Finance Product' that enables those who play the game right to avoid paying sales tax, get the government to pick up the first $15,000 (no down payment needed!), and also receive a 2.95% bankruptcy-dischargeable loan for the balance, the payments for which could be tax-deductible. Yep, 'Revolutionary' may be about right!"
Easy: buy a tesla, go to school (Score:2, Insightful)
1. Buy a tesla
2. Sell the tesla for 90% of its market value
3. ???
4. Profit from a government-financed education at 2.95% (minus 10k or so "lost in transaction")
Re:LOL! American "priorities"! (Score:5, Insightful)
Our government is being managed for the benefit of corporate elites. It's the simplest and most reasonable explanation for what looks like total idiocy from the outside.
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
This is why Education should be funded where the risk is borne by the one making the loan. The repayment terms should be based on a percent of the students income for a fixed number of years.
This is why Education should be funded by The People. If we took the profit motive out of education we wouldn't have to worry about the "administration" making several times what the instructors do for not even teaching.
There is a simple reason for this: (Score:1, Insightful)
It benefits the wealthy. That is what America does: increase the value of the already wealthy, while the rest of us can suck garbage out of a landfill.
Welcome to America! Land of the greatest disparity between the wealthy and the rest of us.
Not exactly (Score:4, Insightful)
Re:Not exactly (Score:4, Insightful)
As a former student with a non-dischargeable 6.8% loan (due to finally be paid off in two weeks, yay), I agree. Sure, the Tesla might be aimed at Rich Guys right now, but that's the way most new technology goes - especially in cars. How many standard features in this year's Focus or Camry used to be exclusive to high-end cars a few decades ago or less? Quite a few. If you get Rich Guys to make it profitable in the beginning, those technological advancements will become affordable and even standard within most of our lifetimes.
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
Grow up. (Score:1, Insightful)
Welcome to the real world kiddies.
It's not just the corporate elites. It's the elites period. Once day you'll be one of them. And you will shit on your fellow man with just as much disdain as the current batch of elites do now.
The only fair system is the one that does nothing equally for everyone, when it doesn't people pick favorites, and there is nothing in this world like being the adopted, bastard, redheaded stepchild in the family.
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
Re:LOL! American "priorities"! (Score:5, Insightful)
From the outside?
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
Oooohhh!!! The scary spookiness of Socialism.
You're right of course.
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
Here's the thing, the free market isn't some magic fairy that shits pots of gold and sprinkles rainbow dust everywhere.
If you want to have education with a profit motive, then the RISK should be borne by universities. Getting government guaranteed loans with bankruptcy exemptions so it can be handed over to a for-PROFIT institution is total bullshit. In this situation, the university is motivated to crank up tuition with no ceiling. When the RISK is borne by universities, they'll price their damn "product" better, screen students better, perhaps even innovate (e.g. charge different amounts for degrees based on perceived ability to earn income).
Of course, that would lead to large stratification of education, with the wealthy drawn like a magnet to the best schools, the poor having to do with leftovers, etc.
And I would argue that outcome is unacceptable for a 21st century superpower, due to the fact that the free market outcome would not adequately distribute available resources, so education should be exempted or removed and handled by "the public" whereby the society itself benefits.
Re:LOL! American "priorities"! (Score:5, Insightful)
Our entire economy and society is being managed for the benefit of corporate elites. It's the simplest and most reasonable explanation for what looks like total idiocy from the outside.
FTFY
Re:Collateralized vs Non-Collateralized Loans (Score:1, Insightful)
No. I don't want to fund the current crop of college students. There is no accountability that they are doing anything worthwhile. The vast majority of degrees are meaningless.
Let the market fund the schools instead of government loans and non-dischargeable debt. The college price bubble would crash and true lenders could actually enter the market.
What am I saying?! Let's just give away more money that we really don't have.
Re:Collateralized vs Non-Collateralized Loans (Score:4, Insightful)
The one making the loan, of course. Moneylending is investting, and investments aren't risk-free.
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
Unfortunately, in the U.S., I fear this would result in a situation where "everyone gets an associates or technical degree", and these programs would end up getting dumbed down so "everyone gets an associates or technical degree" in the interest of "fairness, diversity, and inclusiveness" - just like our K-12 system has. Then, the two year degree would be worth what a HS degree is now - not much.
I think the U.S. should be seriously considering something more like the German system. Put students on one of a few tracks early (maybe fifth grade?). One of these would be a strong academic track which is intended to end up with at least solid STEM MSc or a PhD in one of the "softer and in less demand" disciplines (such as Ancient History). At the other end of the spectrum would be trade oriented curriculum with students learning skills necessary for basic life (some accounting, enough math to figure out interest, basic understanding of government, basic writing skills) and skills specific to a group of trades and including apprenticeships in HS.
If you've ever worked with fifth graders, it's pretty obvious which ones will never be on the academic the track or the one just "below" it. If, in spite of being exposed multiple times to it, they haven't figured out how to compute 6.9 × 0.042 or 42.42 ÷ 0.1, they are extremely unlikely to catch up and even survive Algebra 2 a few years later. However, generally students should be given the benefit of the doubt and put into a higher track if they are "on the bubble" and then be aggressively reevaluated every six months to determine if they should be moved to a less academically demanding track. The requirements and expectations of the tracks should not be adjusted to match the students, the students should be placed in the track that match their motivation, intelligence, and interests.
I would still take the Purdue degree (Score:4, Insightful)
I am biased as I already have a Purdue degree, earned 12 years ago. It was far cheaper back then - tuition and fees were less than $7500 per year. Add in the cost of housing and food and I was all in for around $50000. My first job after college paid more than that per year.
Now, 12 years later, I have three quarters of a million dollars in the bank and a six-figure job. I can write a check for a Tesla sedan without flinching. And as the years pass, I will continue to increase my financial standing.
On the other hand, if I were to buy a Tesla sedan and use it for 12 years I would have an obsolete car with a severely diminished battery. Now, don't think that I dislike Tesla. I have high hopes for them. I made a lot of money buying long-term call options several years ago - in fact it was when the Model S was announced and everyone thought they would be out of business in a year. I put my own money on the line, in the face of overwhelming negative opinion.
I think that electric cars will prove to have far lower operating costs than IC cars - and the benefit gets larger the longer you own and the more miles you drive. But let's be perfectly honest. A degree helps you make money. A car costs you money.
Re:Collateralized vs Non-Collateralized Loans (Score:5, Insightful)
If you want education to be taken seriously we have to change our whole culture.
Basketball players make more money than people who cure cancer, kids know this. People who make sex tapes get on TV, people who educate are mocked on TV.
Expecting any different outcome is foolish when our culture flatly does not value education and will not pay for it.
"free" ha? (Score:1, Insightful)
"Free"? As in: somebody else picks up the tab, even if that somebody never actually has gone to a university himself?
I can see how this is in line with the kind of thinking that never caused any problems, like: everybody should have an affordable house, everybody should have social security, everybody should have medicare, everybody should have risk free bank deposits, everybody should have minimum wage, everybody should have this and that, yeah, that always works in the long run, all of it is a great idea and it doesn't cause damage to the economy in reality by completely misallocating resources and causing massive moral hazards.
Re:Collateralized vs Non-Collateralized Loans (Score:4, Insightful)
What's this free market thing you speak of?
Please don't make fun of other people's religious beliefs. The infallibility of the free market is clearly a matter of Faith, as its proponents are impervious to empirical debunking.
Re:Collateralized vs Non-Collateralized Loans (Score:4, Insightful)
I think the U.S. should be seriously considering something more like the German system. ... If you've ever worked with fifth graders, it's pretty obvious which ones will never be on the academic the track or the one just "below" it.
How do you know "which ones will never be on the academic the track"? Did you follow former 5th graders for life?
While I agree "Ph.D.'s for everyone" is nonsense (other than filling the pockets of the education-industrial complex), the German system is too rigid. Should your performance in the 5th grade determine the path of the rest of your life? I refused to do anything in the 4th through 6th grades (family problems) but wound up getting an MSEE (ok, that's the sort of thing you usually keep in the closet, but I know people who got real degrees too). Similarly, an old friend of mine dropped out of high school and 10 years later went to Harvard Law.
Re:Grow up. (Score:5, Insightful)
No, you won't. That's the Big Lie: if you put up with being shat upon for now, you get to do the shitting one day. You won't. It's just a lie to keep you sitting there in a shower of shit rather than fight those who shit on others. It's that simple.
Besides, if by some miracle you actually became an elite yourself, is getting to shit on others really such a desirable goal? How about you grow up, or at leat try to get past your anal stage?
And that's another lie.
Re:Collateralized vs Non-Collateralized Loans (Score:4, Insightful)
Yeah, but college students usually have very little In the way of a credit history, which usually means that the risk is higher so the interest will be way more.
Part of the interest rate is due to the risk - and students don't have enough of a history to tell you if they're likely to default or not. In fact, the government typically underwrites the loan in order to reduce the interest rate - otherwise a student loan would be fairly high risk.
Think about it - you're loaning something easily $150K, and they have little to no credit history, and they won't even BEGIN to repay the loan until 4 or 5 years down the road. AND there's no collateral. It's an unsecured loan for a fairly large sum of money for a long period of time with nothing to judge who likely the person you're loaning money to will repay you.
All for a 4% fee and 7.9% ROI (that often begins accumulating only AFTER the education is over - so it's interest free while enrolled). Most lenders won't touch that with a 10 foot pole.
Credit cards don't loan out that much money (probably 5% of what a student loan would have) and they still charge high rates of interest.
Student loans are risky from the investor point of view - there are way better investments one could put that sum of money in and earn similar returns.
If a lender were to "free market" a student loan, 30+% APR would probably be the norm given the risks, putting education in the hands of the rich (who can probably avoid needing a loan).
And that's why the government underwrites the loan - the lender is only out the interest should the student default - the principle is protected. Otherwise they won't readily put up what a house costs (for the most part) on something so risky - they'd probably make more money buying and selling houses with less risk.
Re:LOL! American "priorities"! (Score:5, Insightful)
Education finance has some serious issues that need to be addressed. We aren't going to solve them by crying about auto loans. This entire discussion is flamebait - just fishing for angry rants.
Re:Collateralized vs Non-Collateralized Loans (Score:3, Insightful)
You're neglecting to consider what the outcome of this is though. If few people will be given loans for post-secondary education, the cost of that education will come down to the point where students can pay for it with a part-time job, the way it *gasp* USED TO BE.
Education costs are so high precisely because the government is guaranteeing loans.
Re:Collateralized vs Non-Collateralized Loans (Score:4, Insightful)
How are you going to stop the wealthy from getting better services?
Why should we?
Those that keep letting jealousy and spite rule their thinking process are turning themselves and everyone else into slaves.
Re:LOL! American "priorities"! (Score:4, Insightful)
I'm not arguing that education loans should have lower interest rates - just pointing out that the submitter (and maybe the article, but who RTFAs anyway) is specifically picking on Tesla when his beef is with education. Hell, I could walk down to the Subaru dealership and get at worst a 2.9% rate loan with no money down. In any case, I don't think you and I really have differing opinions on the interest rates for school loans and car loans because you are spot on about the investment risk and options in the event of default.
However, I stand by my main point that this summary is written just to rile up the masses.
Nobody here is demonizing Tesla. We are demonizing the government. It is not Tesla's responsibility to make sure tax dollars are spent wisely.
The only federal government involvement here is a $7500 tax credit. This is the same type of credit that's been around for hybrid vehicles for years. You may not agree with them - I don't - but enough people have decided they're worthwhile, so they stick around. Sales tax exemption and state tax credits are the state's issues, write your (much more local) state legislator about those. I know I'd pay full sales tax. TFS is making it sound like everybody's going to run out and get a check from Uncle Sam for $15k and dodge sales tax just for buying a Tesla, but that's a stretch at best and - depending on the tax credit situations in Washington and New Jersey - a outright lie at worst.
Anyhow, I think it's important to talk about the costs of education. People talk about education loans these days as if they're mandatory - ignoring options like scholarships, grants, less expensive school choices, or part time work during college. But this Tesla thing is just an attention grab.