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Student Loan Default Crisis -- imagine what would happen...

WhipperSnapper

WhipperSnapper

Lifer


What would happen if record numbers of student loans began going into default as a result of the piss-poor job market? Presumably, there are tons and tons of "sub-prime" student loans out there--the hundreds of thousands of people with bachelor's degrees who couldn't find appropriate jobs, the 20,000 law school grads who couldn't find legal jobs (since 40,000+ are produced each year and the economy can only support so many new lawyers), the Ph.D. scientists who have large undergrad loans who couldn't find anything better than postdoc positions, etc.

Could it lead to a tightening up of credit in the student loan market and perhaps the end of the education racket? Unlike houses, you can't "foreclose" on a student loan since there isn't any real property to claim. Perhaps banks and the government could try to have the defaulters declared to be slaves.

I will totally laugh my ass off if we end up with a student loan default crisis. Because, after all, lots of angry, overeducated, underemployed-involuntarily-out-of-field (or unemployed) Americans need bailouts too.
 
I don't think that's going to be a problem. For one, there aren't that many students taking out loans, at least compared to the number of people taking out mortgage loans, and two, those loans are much much smaller.
 
Students can't default on their federally backed loans. The IRS will garish their wages. Congress figured that one out after a bunch of boomers walked away from their loans in the 70s. Not only wil the IRS get them, the Social Security Admin will reduce benefits to pay the loans as well. Turns out that students don't have the lobbying muscle that banks have.
 
Originally posted by: LostUte
Originally posted by: WhipperSnapper

There's a lot of compulsion to pay the federally backed loans, but what about the private loans?
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Even those can't be discharged in bankruptcy.
Click to expand...

student loans are not discharged in bankruptcy
 
Originally posted by: Darthvoy
Originally posted by: LostUte
Originally posted by: WhipperSnapper

There's a lot of compulsion to pay the federally backed loans, but what about the private loans?
Click to expand...

Even those can't be discharged in bankruptcy.
Click to expand...

student loans are not discharged in bankruptcy
Click to expand...

they can be, but you have to have an extreme hardship. like, accident leaves you paralyzed all over.
 
Totally different issue that can't be compared to home loans.

Student loans have a fixed value, home loans do not.

I got a $200,000 home loan 2 years ago and now the house is worth $175,000. So I walk away and give the house back to the bank. The bank losses $25,000.

Doesn't work the same way with a student loan. My $10,000 student loan will always be a $10,000 loan.
 
Originally posted by: WhipperSnapper
Originally posted by: LostUte
Originally posted by: WhipperSnapper

There's a lot of compulsion to pay the federally backed loans, but what about the private loans?
Click to expand...

Even those can't be discharged in bankruptcy.
Click to expand...

Maybe not, but that doesn't meant that they'll be paid.
Click to expand...

wage garnishment.

Unless you change jobs every year & stay off the credit grid, the lender wil be able to get up to 1/3 of your wages until the loan is paid w/ back interest.

 

Oh well. I guess this is a huge boon for the education racket and that this way politicians and the media will be able to continue to lie to Americans and tell them that education is the solution to our economic problems. If government kept out of higher education and left it to the free market, we probably wouldn't have an oversupply of college-educated Americans and far less misery in the form of wasted educational investments (for non-existent job positions).
 
I can't claim to fully comprehend what's going on right now with the US economy, but that said some sort of action needs to be taken. Adding $1 trillion to the debt and forcing our children/grandchildren/great grandchildren to pay it back is simply unacceptable IMO, but a sad part of human nature.

Our society right now seems to be top-heavy in the sense that the old have tons of money and the young are left scrambling to figure out this new "information renaissance" that we have experienced throughout the past 20 years.

I guess what it comes down to is fiscal responsibility.

Your right-wing government is quite hypocritical in borrowing $$$$$$ from China to fuel its flat-out capitalistic mess.

TBH I don't know why people even study in the US at $30,000+ a year for tuition in some cases. In a sense I suppose it explains Bush being elected (and re-elected).

If McSame gets voted in, I will officially lose all respect for American society and its collective level of intellectual and moral responsibility.
 
Student loans are inescapable. Unless you can get enough credit cards to cover them... It's how the government penalizes you for trying to better yourself. They have no problem if you buy something you obviously can't afford, but will be holding your feet to the fire for the rest of your life if you try to get an education, then the job market turns south. Idiots are rewarded while responsible people are penalized. Welcome to the new USA.
 
Yeah this student loan BS sucks. Just as I finish school and find a job the economy goes to shit and I get laid off and still have to pay the damn loans. It's been very frustrating.
 

Well, the policy is to try to keep people who own student loans from defaulting, that way student loans are widely available and anyone can get the money to go to college. It's only afterwards that they learn that there's an oversupply of college graduates and that they may have wasted their time and money.
 
Originally posted by: ProfJohn
Totally different issue that can't be compared to home loans.

Student loans have a fixed value, home loans do not.

I got a $200,000 home loan 2 years ago and now the house is worth $175,000. So I walk away and give the house back to the bank. The bank losses $25,000.

Doesn't work the same way with a student loan. My $10,000 student loan will always be a $10,000 loan.
Click to expand...
Or another way to look at it is the $200k loan has $175k collateral now and your $10k student loan has zero unless you're going to let them cut your brain out.

 
Originally posted by: ProfJohn
Totally different issue that can't be compared to home loans.

Student loans have a fixed value, home loans do not.

I got a $200,000 home loan 2 years ago and now the house is worth $175,000. So I walk away and give the house back to the bank. The bank losses $25,000.

Doesn't work the same way with a student loan. My $10,000 student loan will always be a $10,000 loan.
Click to expand...

Ahh but what if in the interest rate doesnt exceed inflation?
 
Originally posted by: smashp
Only way out of a student load in Death
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Not even death will always get you out of a student loan. Your family can still be called upon to pay them back under certain conditions. Talk about a kick in the pants.
 
As long as the government is tightening regulations on the mortgage and credit markets, I think they should do something about Sallie Mae's de facto status as lender and creditor.
 
Originally posted by: CptObvious
As long as the government is tightening regulations on the mortgage and credit markets, I think they should do something about Sallie Mae's de facto status as lender and creditor.
Click to expand...
CitiBank owns my soul for the next 30 years. Who's this Sallie person? 😛
 
You have to have wages to ganish.

I work at a school and have access to Loan information. The fact is, some schools tuition rates are just too high. It is like the schools are stealing. Remember it is the schools that are paid off through this education loan system. We should just cut off loans for schools if the tuition rate is too high. This is how supply and demand should work.

Typically at our school we have Stafford Subsidized and Unsubsidised loans and the Loans are guaranteed by a Bank. Students choose the bank, and then get a Promissory note and then the loan is processed electronically. No one forces anyone to get a loan and the student has to do online loan counseling and verify that they know they have to pay the loan back.

I think student loans are evil. Just try paying one back. Be very careful about asking for student loans. The banks will squeeze you for every penny you borrow. On the other hand the interest rates are low.

If the default rate gets too high then the school will not be allowed to offer govt backed student loans. Schools get inspected when they are handling the Federal Government's Money.
 
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