The way SLM is able to skirt the bankruptcy system is pretty bad. They make money on loans, then charge the government and then try to collect the loans by way of their subsidiaries.
Ultimately, I think the Federal Government would pay those losses. I don't think that's a problem necessarily; they just need to make a provision for those losses from the profit they make on the loans -- the "slush fund" -- they need to charge enough to cover it just like you would with bad debt. More generally, I agree with the sentiment some had that this is a bubble. Just like easy credit made a bubble in house prices, it's making a bubble in college tuitions. You could avoid the situation by getting the government out of teh system altogether, but it would be way too disruptive to do that at this point, and perhaps not desirable given the importance of college education to the national economy. So, when deregulation can't be the answer, maybe more regulation is the answer: cap tuitions on schools using government-subsidized student loans. Unable to increase tuitions, schools will cut opex and/or increase their scale. It also occurs to me that it is a highly fragmented industry. There are only 3 big cell providers, only a handful of big steel producers, only a handful of big American auto manufacturers, but there are hundreds of big independent universities and university systems and thousands more little ones. Would we have this same trouble if there were, say, 5 university systems? There would still be thousands of locations, but only 5 marketing departments, only 5 admissions departments, only 5 accounting departments, and so on. Maybe we're just really, really ripe for an industry consolidation.
I guess I'm a bit confused here, I have a minimum monthly payment for my student loans, in the neighborhood right now of around 17k. My payment plan calls for me to have it all paid off in 10 years, I pay a little more than I should and starting next Summer will be making 3 times the payment. So how does someone go 20 years paying off their debt? Besides the doctors and lawyers of course. Then that begs the question, is this just something else that benefits the wealthy while screwing over the middle class?
You've gone back and forth about it but I don't think anybody has mentioned that this explosion seems to correlate very highly with the rise of the for-profit education sector, which, btw, happens to be responsible for half of all defaults....
Another GOP crazy that wants to limit college to the rich and the privileged. Lol. Encourages reckless borrowing. The money that is borrowed from aid programs are a NECESSITY. Reckless borrowing would be like using credit to pay for LUXURIES.
No kidding. I'm paying for my son to go to an out of state public university and it's as expensive as a good private one. If you aren't from that state, you are **** out of luck. If he were paying his own way, he could easily rack up 3 figures in debt just getting his engineering degree, much less a graduate degree. Hell, I can remember when I could have purchased a brick house in the Montrose for what one year is costing us.
Hey bud, I sit right in the middle. I'm hardly a 'GOP crazy' and I hardly want to limit college to the rich & privilege. I'm speaking from experience and I can tell you that student loan debt is used to pay for luxuries. A lot of college kids can't handle the access to easy credit with no ambition or plans and are simply in college taking loans because thats kinda what they think they should just do rather than having gone into a trade school, union apprentice type role or even the military. Not everyone should go to college. Also, there was a previous post that detailed how student loans are worse than the mafia (or to that extent). Does anybody have that file? I wouldn't expect you, Red, to understand my statement while you xbox live it up. Meanwhile I'm working two jobs to get my wife through dental hygiene school and using guess what to offset her lost income? Student loans. I think they're a great tool but are a double edge sword like all easy money.
Good point. I always say no regrets but given a second chance I would have done things differently in college. But don't we all have some type of regret dispite our insistance in saying we don't? However it doesn't eat me up inside like it did when I graduated. I have a plan to remedy the regret. I have a job and I like it. And I only wasted 4 years of my life partying...sort of.
For real. At least Obama is trying to creat jobs versus keep the economy depressed to win an election. GOP is the party of the rich and selfish. They would throw their grandma under the bus to get a vote
I borrowed 80k to go to an ivy league school. Had no idea what I was going to do with my life and graduated with a bachelors of arts. Loan money went right to tuition room and fees...wasn't enough to food or books. Cheap work study gig for 5 bucks an hour was so pathetic I eventually quit and worked in catering on weekends to pay for food. Living it up? Hardly. Luxury? Insane. How many doors did having an ivy league degree open up? A ton. Am glad I did it. No trade school could have matched the warming potential from a college degree. Anyone who doesn't value higher education doesn't understand that it takes more than a hard days labor to make it in today's America.
It's actually suggested that you don't work during school if you don't have to. Working takes time away from studying or being involved in things on campus, and both of those things can lead to a better job post college than working some part-time job while in school (on average). Of course an internship in your field is a completely different story. It may be better to not work, get a 3.5, accumulate some debt and make more $$ once you graduate than get a 3.0 and wind up with a lower paying job.
Regardless the opportunity should still be there. Hashing out student loans won't do a damn difference except lower the amount of kids getting an education. What about the kids that should go to college but can't?
This might be more hangout material, but this thread got me interested in whether I (or others) can actually use this program for personal benefit. Here's an article to that affect: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/10/27/BUU81LMKD2.DTL&type=business [rquoter]White House help on college loans isn't so much Kathleen Pender Thursday, October 27, 2011 Around the same time the College Board was releasing a report showing that the average tuition at a four-year public college rose 8.3 percent last year, President Obama was in Denver on Wednesday telling college students that he is taking steps to ease their debt burden. Students who look into the details of the loan-relief program are likely to be underwhelmed. The U.S. Education Department announced some of the details Tuesday. They involve two changes to federally backed student loans such as Stafford, Plus and Perkins loans. Not all of these loan types will be eligible for both of the improvements. Neither of the changes will apply to private student loans that are not government-guaranteed. Here's a look at the two changes: -- Special Direct Consolidation Loans. Students who have two types of federal loans and consolidate them can lower their interest rate by a quarter of a percentage point on some of their loans. This will mainly affect a group of borrowers who have already graduated or left school. To qualify, you must have two types of federal loans - at least one issued by the Department of Education under the direct loan program and at least one issued by a bank or other lender under the Federal Family Education Loan program. The FFEL program ended in July 2010, and since then all new federal loans are direct loans. If you consolidate these loans into the direct program between Jan. 1 and June 30, the government will reduce your rate on the FFEL loans only by 0.25 percent. The rate on your direct loans will remain unchanged. How much will this save? Not much. If you have $20,000 in FFEL loans at 6.8 percent and repay them over 10 years, the quarter-point rate cut will save you $2.56 a month or $307 over 10 years. (You can do this calculation with your own loans at www.mappingyourfuture.org/paying/standardcalculator.htm.) Before making this switch, make sure you won't be worse off. Prior to the financial crisis, some private-sector lenders offered substantial discounts on FFEL loans - up to 2 percent - if you made a certain number of on-time monthly payments, such as 48. Before moving into the direct loan program, find out if you would have to give up this rate reduction, or the chance to get it. Cut already available In its promotional materials, the Education Department says borrowers who consolidate under this new program can get an additional 0.25 percent discount on all of their loans if they sign up for automatic payments. But this rate cut is already available for all borrowers in the direct loan program (and many in FFEL loans) who sign up for electronic billing and auto pay, says Mark Kantrowitz, publisher of Finaid.com. So it's not really an enhancement to the program. The department says about 6 million borrowers could get this break. It adds that encouraging FFEL borrowers to move their loans into the direct program will save the government money on servicing costs and cut down on defaults if borrowers have only one monthly payment to make instead of two or more. For more on special direct consolidation loans, see sfg.ly/vL66od. -- Pay as You Earn. The other change will mainly affect students who are in college today and will be next year. They might qualify for a new program dubbed Pay as You Earn, which is an enhanced version of an existing program called Income Based Repayment. IBR helps borrowers who owe a lot relative to their income. In general, borrowers could qualify if their student loans exceed what they make in a year, although borrowers with smaller debt loads might qualify if they have a family, said Lauren Asher, president of the Institute for College Access & Success. Under IBR, student loan payments are capped at 15 percent of a figure known as discretionary income. Any remaining debt is forgiven after the borrower has made payments under IBR for 25 years (which do not have to be consecutive) or after 10 years if the borrower works in a public-service or nonprofit job. Under a law passed last year, borrowers who take out their first loan in July 2014 or later and enter IBR will have their payments capped at 10 percent of discretionary income instead of 15 percent and any remaining debt forgiven after 20 years instead of 25 (for private-sector jobs). Those enhancements won't be available to today's students or people who have already graduated. Pay as You Earn accelerates the start date of the 2014 changes to help students who are in school today after they graduate. To qualify, you must have taken out your first federal student loan in 2008 or later and take out at least one more student loan in 2012 or later. Justin Hamilton, a spokesman for the Education Department, said Pay as You Earn is mainly designed to help "students who entered college at the height of the financial crisis." But it won't help students who graduated during the financial crisis or before. The administration estimates that 1.6 million student borrowers could one day benefit from Pay as You Earn. (There are about 36 million borrowers participating in the student loan program.) It says the two new programs combined won't cost taxpayers money because savings from the loan consolidation program will offset the interest rate reductions and loan forgiveness. The programs do not need congressional approval. The occupiers of Wall Street and elsewhere who are demanding student-debt relief won't benefit much from the two changes, Kantrowitz says. But many could benefit from the existing IBR program, if they knew about it. He estimates that only 1.25 percent of current borrowers are taking advantage of IBR, in part because it has not been well publicized. Promoting IBR The Education Department said Tuesday that it is "taking steps to make it easier to participate in IBR and continues to reach out to borrowers to let them know about the program." Asher says that might be the most important part of this week's announcement. The other two changes "will help make payments even more affordable for certain borrowers, but raising awareness of Income Based Repayment can help millions of borrowers who are struggling now get their payments under control and qualify for forgiveness after 25 years," or after 10 years in public service, she says. To learn more about IBR, talk to your lender, see sfg.ly/vSuLFe or www.ibrinfo.org, or call (800) 433-3243.[/rquoter] Okay, so the revisions aren't very helpful. But, the original IBR might be. Here is an informational website on the program: http://www.ibrinfo.org/index.php It looks like it would actually apply to me, but the recent Obama changes would not. It covers Direct and FFEL loans for undergrad and graduate school, which covers most of my loans. I think I have a Perkins loan in there somewhere, and I would have to consolidate it with others to have it apply. However, I don't think it is a good idea for me. My biggest loan is also the most recent, taken out for an MBA, and I have 7 more years on it. I can make it hurt somewhat less, but given that the interest would accumulate more as a result, I would in effect extend the term over which I pay and ultimately pay out more money in interest. If I were to actually avail myself of debt forgiveness* 22 years from now, that would mean paying 15% of my 'discretionary income' for over 2 decades, which seems far worse than living frugally for 7 years. So, I'll probably stick with what I've got. * To even qualify for the forgiveness, you need to actually make payments over that whole time (though doesn't have to be consecutive) without paying it off, so I don't see how anyone would actually use it. You would have to be extremely underwater on your college education for a very long time and yet still more-or-less faithfully pay your bill each month. I don't foresee many people having a salary that low and yet still be a good payer. I imagine it only is ever used on the shorter 10-year plan for non-profit and public service workers.
