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Computers aren't just doing hard math problems and showing us cat videos. Increasingly, they judge our character. Maybe we should be grateful.
A company in Palo Alto, Calif., called Upstart has over the last 15 months lent $135 million to people with mostly negligible credit ratings. Typically, they are recent graduates without mortgages, car payments or credit card settlements.
Those are among the things that normally earn a good or bad credit score, but these people haven't been in the working world that long. So Upstart looks at their SAT scores, what colleges they attended, their majors and their grade-point averages. As much as job prospects, the company is assessing personality.
The idea, validated by data, is that people who did things like double-checking the homework or studying extra in case there was a pop quiz are thorough and likely to honor their debts.
http://bits.blogs.nytimes.com/2015/07/26/using-algorithms-to-determine-character/
[Other Companies Involved With Similar Programs]: ZestFinance , Workday
(Score: 3, Interesting) by Anonymous Coward on Monday July 27 2015, @06:59PM
The crushing burden of student loans on an entire generation of young people might lead many of them to make choices that one wouldn't have expected from their prior education or work history.
I got an excellent score on my SATs, and then got into a good college from which I graduated with a good GPA. However, I still walked away from many tens of thousands of dollars of student debt after I decided to move abroad for work and love and I learned that debt doesn't follow one outside the US. Since I gave up on my student loans, I thought I might as well walk away from my US credit card debt as well. Now, while there is a growing tide of people leaving the US and then ending payments on student debt -- or moving abroad precisely so that they can avoid repaying loans -- even many young people back in the US are finding it impossible to repay debt, however accepting of the obligation they might have felt when they incurred that debt.
So, I think that people might be more reliable in repaying non-student debt if they didn't have much larger student debt to deal with. I wonder how the presence or not of student loans ties into this company's algorithm.
(Score: 3, Interesting) by Francis on Monday July 27 2015, @07:05PM
There's also little or no oversight on the loans and once you've got them they can't be discharged in bankruptcy procedings. Which means that once they say that you owe them money, it's basically impossible to get rid of the "debt" through the normal means. You have to pay them whether or not the money is owed.
The local comunity college is still claiming that I owe them money. It took them 6 years to send the initial bill alleging the debt and they have yet to provide any evidence or documentation that the debt ever existed. But, because you can't take the state to small claims court, I lost access to my transcripts. Thankfully, I stayed in school and was able to complete two more levels of education, so nobody's going to question the existence of the certification. I could even leave it off entirely, but I'll "owe" the money for all eternity. The troll didn't even list it on my credit history so I can't even sue for that.
(Score: 1, Interesting) by Anonymous Coward on Monday July 27 2015, @08:47PM
> There's also little or no oversight on the loans and once you've got them they can't be discharged in bankruptcy procedings.
That is a common myth. It is hard, but not impossible, to convince a bankruptcy court to wipe them out. [usnews.com]
(Score: 1) by goose on Tuesday July 28 2015, @06:07AM
There's also little or no oversight on the loans and once you've got them they can't be discharged in bankruptcy procedings.
So? Take on normal debt (credit card, personal loan, overdraft, etc) and use that to pay off the student loan. Now the debt you owe *can* be discharged easily.
(Score: 2, Insightful) by Anonymous Coward on Monday July 27 2015, @07:21PM
You are a good example of the challenges of trying to capture intangibles such as good character, honor, self-respect in an algorithm. Society will always have that element of selfish deadweight who feel entitled to take and never give back; those who feel justified in eschewing responsibility and hard, honest work. Perhaps it is a symptom of the participation trophy society where some people feel they are owed all and owe nothing in return. I could never relate to those who would willingly order and consume a lavish restaurant meal then skip out on the tab and not experience a pang of guilt nor feeling of remorse, content in their feeling that they were entitled to that meal.
One can only hope that with yourself and those like you removing yourself from society is that it strengthens the moral fabric for those left behind.
(Score: 1, Touché) by Anonymous Coward on Monday July 27 2015, @07:38PM
You must be referring to the banks that made irresponsible decisions and then were swiftly bailed out by the government in 2008, even as millions of hardworking Americans who had been entirely faithful to their loan obligations up to that point got absolutely no relief.
(Score: 1, Insightful) by Anonymous Coward on Monday July 27 2015, @08:44PM
It takes two parties to make a bad loan. The bank giving it and the person taking it.
If there is one thing to learn in the banking world is that the banks do *NOT* have your best interests at heart. When I was buying a house 15 years ago. It was dizzying the number of 'packages' they were offering. Only 1 package was 'ok'. The rest cost 10-30k more yet had 'smaller monthly payments'. That was years before the 'crisis'. They were offering to give my father who had no job a 400k loan. To talk him out of it it only took one question 'what happens if you can not pay it back'? He came to his senses and realized he would be under a bridge for a few weeks as I lived in another state at the time and then would be stuck living with me.
A former boss of mine put it best 'bankers pay each other to come up with better ways to separate you from your money'.
Given all of that? The risk is on you. YOU have to have the means and spine to pay it back. If you are going into it to rip off the bank what does that say about you? I know the banks are shady. At this point the only one who has to prove they have integrity is you. You are using the classic child's lie of 'but they did it too'. I dont care about them. I care about what YOU do.
(Score: 0) by Anonymous Coward on Monday July 27 2015, @08:51PM
> Given all of that? The risk is on you. YOU have to have the means and spine to pay it back.
What? The risk is on the bank, they made the loan. They literally assumed the risk of default.
You just got finished describing how the banks are out to fuck people and then you want to say that what's good for the goose is not good for the gander?
> I dont care about them. I care about what YOU do.
You don't give a shit about what he does other than as a way to wrap yourself in the cloak of false righteousness.
(Score: 2) by vux984 on Monday July 27 2015, @09:54PM
It takes two parties to make a bad loan. The bank giving it and the person taking it.
Wile that is true. The party with the cash takes the risk that the party they are lending it to will default. The compensation for taking that risk is the interest. The higher the interest, the more risk the lender is prepared to take. That is the fundamental nature of lending.
If there is one thing to learn in the banking world is that the banks do *NOT* have your best interests at heart.
Of course not.
Given all of that? The risk is on you. YOU have to have the means and spine to pay it back. If you are going into it to rip off the bank what does that say about you?
Honestly. It says nothing about you. If someone lends me money, my decision to default or not default on the payment should be made with my self interest at heart. If the consequence of defaulting is a more favorable outcome to me than not defaulting than I should default.
If the bank gives me money on such unfavorable terms that i am better off defaulting, then that poor judgement is on them.
At this point the only one who has to prove they have integrity is you
My integrity is irrelevant; and not related to this decision. Defaulting on a debt is not a criminal act. Defaulting is not an immoral act.
I dont care about them. I care about what YOU do.
Why do you care whether I make the sound financial decision to default on a debt that is not worth repaying? I didn't assume that risk, the lender did. They factored into their expected returns the risk that I would default.
(Score: 1, Insightful) by Anonymous Coward on Monday July 27 2015, @08:49PM
Indeed. It has nothing to do with personal responsibility and integrity. They FORCED you to be this way. You're ENTITLED to anything you want, and who are they to say you can't get what you want? Your momma always did say you were special.
This moral morass can be hard to capture in an algorithm. My first cut at it would make character inversely proportional to the number of participation trophies earned as well as the number of times a parent called a teacher to have a grade changed (or if the teacher was a college prof, then one over the square). You learn responsibility by being put in a position of responsibility. You work a job. You have to show up every day on time. You learn the value of something by earning it. These are things that are lost on many people today.
You should be forgiven your credit card debt because of the evil banks, you should be able to pirate software because of the evil software companies, you should be able to freely download music and movies because of the evil record and movie companies. The most important thing to remember is that IT IS NEVER YOUR FAULT.
As I said, perhaps writing off the credit loss is a reasonable trade-off for strengthening the social fabric by having these people willingly leave the country. Strong societies are built on the backs of strong contributors, not from the leeches and dead weight.
(Score: 2) by kurenai.tsubasa on Monday July 27 2015, @11:28PM
A few things. First, I'm in total agreement that GP should feel ashamed about what they've done. GP received an education in exchange for a loan that must be repaid. Those were the terms and conditions; they must be honored unless GP can point out if they were lied to or coerced. I don't think either of those is the case, not in a strict sense anyway.
That being said, I'm not seeing an innocent party here. I think all the actors and factors involved from student loan sharks, skyrocketing tuition, an education arms race, the transformation of institutions of higher learning into vocational schools, degrees becoming participation trophies, destruction of primary and secondary education, stagnation of real wages, etc—and finally GP's poor choice to participate in this system—are indicitive of a broken system.
Don't get me wrong. Bad on GP. The larger problem is that the systematic dysfunction will blow up in our faces sooner or later. The only “out” I see is if 300 million people wake up tomorrow and realize that, for example, if you hold a degree but can't perform basic algebra, the degree isn't even worth the paper it's printed on. (No exaggeration here. I've seen it myself. When I see this phenomenon, I often wish there were some kind of process I could use to not only revoke the person's degree but revoke their high school diploma. I'm not even talking about “millennials” here or the inevitabilities of advanced age.)
How long until one needs to hold a master's degree or doctorate to work a minimum wage job? Where does the arms race go from there? Baristas who are doctorates in 5 or 10 subject areas and just starting out in the world at age 35 and 6 figures of debt? It sounds absurd, but that's where we're headed. There's always the Flynn effect, but I find it hard to believe these future baristas will all be genuine polymaths.
We keep hearing about how actual trades like HVAC, plumbing, and construction are in increasing demand. Why not push kids into those trades? Furnaces break down, pipes leak, and buildings need to get built. Plus, as a homeowner, practical handyman/woman skills are invaluable. But nope, everyone has this insane belief in the almighty degree as the only acceptable gateway into a career. Well, one reason not to depends on how soon one thinks those jobs will be automated. I've thought about going back to driving big truck many times myself, but the writing's on the wall wrt automated trucks. Better to stay in a field where I might wind up as one of those ephemeral “robot technicians” we're all supposed to retrain as in 10–20 years.
If I were a teenager in the USA today, I'd seriously be looking at studying abroad. Germany would be my first choice. I might still do that if one doesn't have to be a recent high school graduate to get the free ride (although through the years I've gone from almost fluent to the point I don't know how I'd survive until it came back to me). Is free higher education sustainable or a good idea, or is it simply fuel for the education arms race? Then again, Germany has a quite sensible approach imho to schooling: they recognize that higher education is not for everyone. Not everyone will make a good nuclear physicist or robot technician, but perhaps that person would make a good plumber or construction worker. We'll have to watch to find out.
Another possibility that's been put forth is that instead of paying universities up front with a loan, perhaps enter into an arrangement where the university gets x% of your income for the first 10 years of your career. Under that arrangement, however, I'd expect even being accepted into a program for something like teacher or biologist or physicist would require passing an insanely high bar. They'd probably hand out finance degrees like hotcakes. So, perhaps this isn't a much better model for funding higher education.
The only real solution that would ever see the light of day in the USA would be to outlaw student loans. However, that has perils of its own. It would turn university budgets on their heads. In the long run it might work out, but expect at least a decade of chaos to trim the bureaucracy. I don't know if I could rightly predict how it would play out exactly short of universities becoming ghost towns for a while. I can see an uptick in scholarships available for the truly talented potential student, but generational wealth may end up rearing its ugly head. Anybody who wants to take a stab at this scenario, post away! Don't be shy!
My point is the student loan system is inherently unsustainable. It's a tragedy of the commons and also the logical conclusion of a system that encourages young people who simply don't have the life experience to make a rational choice to go into tens of thousands of dollars of debt in exchange for a promise that the university has no way to deliver.
Go on about personal responsibility all you want and I'll pretty much agree, but you can't get blood out of a turnip. Ideology, meet reality.
(One final comment is that in the long run, while I'm not entirely sure I exactly believe in the religion of the Singularity, and I'm not exactly sure the next act in the history of humanity isn't another dark age, barring collapse or self-destruction, the vast majority of us will be freeloaders whether we like it or not—or dead.)
(Score: 0) by Anonymous Coward on Tuesday July 28 2015, @12:08AM
GP here. I moved to a country in the developing world where at a full-time job I make about $800 a month. That's a middle-class life here, and with this money I am supposed to support my wife and children. The lowest that the student loan authority was willing to lower my monthly payments to was $500/month, in spite of repeated pleading that I wished to honor my obligations, but I could only do so with the means I had. No, sorry, I'm not going to feel ashamed. Would you choose a gigantic, impersonal bank over your family in such a case?
(Score: 2) by Phoenix666 on Tuesday July 28 2015, @10:55AM
I would differ with you here. What moral obligation is there when children in the United States have college and student loans marketed to them from an early age? In my case, they started in earnest in the 4th Grade, and that was 30 years ago. I recall distinctly them throwing sops to "getting scholarships to pay for college!!" only to find that when it came time to apply for those scholarships for matriculating at a university that charged $30K/yr that 90% of them were for minorities or special classifications which did not apply to me, and that 100% of them were for, say, $1000. So, let one high school graduate be incredibly awesome and win 30 of those $1K scholarships to pay for *one* year of college? Anyway college and student loans were universally, relentlessly marketed to me with the understanding that a college degree from a respected university was the key to a successful future!
Fast forward a few decades, and come to find out that, surprise, surprise, holding degrees, even advanced ones from one of the top 10 universities in the world, doesn't count for shit. So, well tough luck we're not going to uphold our part of the social contract that if you work & study hard and get good, solid degrees from respected colleges that you'll have career success! But hey pay up, bitch!
I say let the banks and student loan companies and the colleges burn.
This is excellent advice and I highly recommend any Soylentil with kids who will someday go to college to remember it. I know it's my plan A for my own kids, who are 4 & 6 years old now. College in America is already ridiculously expensive, and it will only get exponentially worse by the time they're in high school if the whole Ponzi scheme that it is doesn't collapse before then. Germany lets foreign students go to college for free. As such I'm teaching my kids the German I learned as an exchange student there in high school; they're gonna need it.
Plan B is to teach them how to get a college-like education by finding stuff online, building portfolios of work they have done, and teaching them how to network through apprenticeships and internships. In the end, it's about what you can do and who you know, not about some stupid expensive piece of paper.
Washington DC delenda est.
(Score: 0) by Anonymous Coward on Monday July 27 2015, @11:34PM
While I take your point about those who act like "selfish deadweight", I think you should also temper your remarks with the realization that not too long ago much of college education was paid for by taxpayers. It was considered a public good to have a well-educated populace. At some point, though, state legislatures turned on the younger generation with their own attitude of "fuck you! I got mine!" Why do you think that happened? And please note, this is not about an over-indulged "participation trophy society" merely looking for a hand out. Anecdotally, I graduated from University of Michigan in the 1980s with a few thousand dollars of school loan debts. Today, it is not unheard of for a student to rack up well over $100k of student loan debts. What do you suppose will be the long term effect of having a large percentage of the populace carrying such a high debt burden? Do you really think this is sustainable? Do you really think this is desirable?
Uh, are we talking about corporate subsidies and bailouts or student loan debts? Hmmmm.
(Score: 0) by Anonymous Coward on Tuesday July 28 2015, @02:58AM
Of course its not sustainable, but who fucking cares? We'll be as rich as can be, and we'll have a nation full of slaves. Its not our problem if those poor saps are so irresponsible that take out loans they can't pay. Maybe if they'd learn how to save money, put some backbone into it, and stop suckling off the government's teat they wouldn't be such wastes of air. Its called "personal responsibility".