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Student Loan Fairness Act (HR 1330)

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pcgeek11

Lifer
Jun 12, 2005
17,543
1,758
126
How is student loan debt any different?

At least the method I mentioned is dependent on your success where student loans are dependent on how much the university wants to charge.
I don't have a beef with Indentured Servitude. If someone is willing to sign on good for them. The problem would be they would be bitching about how they were taken advantage of. Just like the stupid ones are now with the massive loans that they agreed to but now they want someone to bail them out.
 

TheVrolok

Lifer
Dec 11, 2000
23,253
2,517
136
so you life is practically ruined till you are mid 40's then you have to start saving for retirement.
You got it. Oh, don't forgot people (many people) have little respect for doctors these days and view them as money suck vampires who don't care about treating patients.

At 6%, that works out to $400,000. I cannot for the life of me imagine what would compel anyone to take on that much debt for school.
Well, my desire to be a physician compelled me. It's either I take the loans, or I don't become a physician; the latter is unacceptable.

To give you the run down:

Stafford 207k @ 6.8%
Graduate PLUS 68k @ 7.9%
Graduate PLUS 16k @ 8.5%

I accrued ~24k in interest during school.

These interest rates were(are) non-negotiable.

I did have undergraduate loans as well, but I worked 2 full time jobs during school and took 2 years off before medical school and paid them all off - though my savings were essentially non-existent save for what assets (very little) I had and around 24k in my Roth IRA which I obviously did not contribute to during medical school. This is fairly standard for a medical school student who is putting him or herself through school.

med school where you can make 250k-400k a year after your finished?
Actually, you can't, not even close, likely not even 3-5 years out. Minimum time spent is residency after school is 3 years. During that time you will be making between 40-55k a year depending on your location. My salary out of school ~ 40, 41.5, 43k net each of those three years. After that it would be possible to find a job for somewhere around 180-200k/year at which point I would have to start paying far more into my aforementioned loans since I didn't even dent them (in fact that drastically increased during my 3 years post graduation) during residency.



I hope this gives a little bit better understand of what the "average self-supporting" medical school grad is doing these days.
 
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Charles Kozierok

Elite Member
May 14, 2012
6,762
0
0
TheVrolok -- thanks for laying that out. Your debt total seems to be over double the average incurred by most medical students. I'm not sure why that's the case but certainly even half of what you are dealing with is staggering. I hope you will be able to pay them down quickly once you are done with your residency.
 

TheVrolok

Lifer
Dec 11, 2000
23,253
2,517
136
TheVrolok -- thanks for laying that out. Your debt total seems to be over double the average incurred by most medical students. I'm not sure why that's the case but certainly even half of what you are dealing with is staggering. I hope you will be able to pay them down quickly once you are done with your residency.
The averages are very heavily skewed by second, third, fourth generation students. I have a class of roughly 230 students. I'd say probably a third of them aren't paying a dime for school (they incur 0 loans). Then there is another fraction that have their parents covering tuition, but they take loans for room+board and spending cash (about 25% of my loans). Then of course there are the students on military scholarships (which is admittedly few students - perhaps 5%) who take very little, if anything in loans. Also, the "second career" students who already have families or another income in the household that can offset costs very heavily (though, the non-financial burdens on the family are incredible). It can be vary widely. My girlfriend, for example, has about 100-120k less in loans than I do, because she is a local and lived at her parents house during school.

Because I come from a blue color family, paid my way (mostly) through undergraduate school, and entirely through medical school I borrowed every single dime I lived on. I am on the far end of the borrowers spectrum. As I've laid out above, there are just as many people on the opposite end of the spectrum - thus, the average. I get very frustrated when people say it's not so bad based on the average (not implying that you did), because the average is not the reality for many of us. My used car just hit 110k miles and I'm just praying it lasts another 3 years, while some of my colleagues have school paid for and are given a new Mercedes for graduation (to replace the Mercedes they were given for school).
 
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LegendKiller

Lifer
Mar 5, 2001
18,261
68
86
I end up paying a lot of attention to SLs for my job and am very wary of this issue. The problem is that all of the research I read coming out of DC indicates that there isn't a huge concern coming from politicians.

Not sure if anybody put it into perspective yet, but here's my rundown.

There are ~$100bn in Private SLs outstanding, SLMA owns the huge proportion of those. Pre-crisis lenders included Access Group (lawschool) and First Marblehead. FM died when they issued a crap-ton of Direct To Consumer loans. DTCs are loans in which the amount needed is not verified by the school (traditional loans made in this manner are called School Channel), thus, the borrower can use them for anything. FMs insurance company, TERI, died after the huge surge in defaults and FM was toast.

The FFELP portion of the world has pretty much ended in 2010. There are ~200bn outstanding loans.

As of today the US Government has ~$700bn of DirectLoans on the DoE balance sheet and are originating ~$120bn per year currently. The originations are partially FFELP refis, which the government has been pushing, and mostly DL new originations.

This really means that out of the 16tr in debt almost 1tr of that is SLs. The government decided to end that program because "wall street" was getting "rich" off of it. The problem is that WS wasn't getting rich. Because of the USG guaranty SLABs (Student Loan ABS) was not priced super well. Underwriting fees for the banks weren't huge and servicing fees for everybody are marginal.

The funny thing is that the servicing fees are going to the same people anyway.


As far as performance goes, you can see that performance, by school, pretty easily. The DoE publishes the Cohort Default Rate here...

http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html

The problem is that they are only on a 3-year basis, so we can't really tell what the true default rate is, yet. Typically default curves will have somewhat of a front-end loaded curve with smaller incremental defaults thereafter, we haven't seen that yet, especially in this environment.

But, as I said, DC thinks this isn't a problem. They say the DL program is profitable, which it may be. Thus they really don't care. They don't even think about the problems of household formation and the drain on GDP this whole thing is going to cause. Furthermore, they say "well, we are getting more co-signers than ever", yet fail to recognize that parents who co-sign and see their kids default will not retire, thus their kids will not get jobs from others moving up to replace the boomers. Even if the parent *thinks* their child is going to default they will keep working, especially in this environment.

But the politicians are sticking their heads in the sand. Dischargability MUST return to at least the privates and most likely the USG loans also. However, it needs to be predicated upon a bankruptcy trustee's complete oversight. Thus, a doctor or lawyer looking for a discharge will not be able to find a quick/easy answer but will need to make payments for 5-10 years, then have a re-eval and a right-sizing of the loan, which may mean a complete dismissal but for higher-end jobs would mean a reduction.

The next thing that happens is that DLs need to be underwritten by school, degree, co-borrower...etc. Not everybody should go to school.

Further, I think an alternative to the "everybody should go to school" is to have the USG offer free 2-years of education at a non-profit community college if grades are good enough to transfer to a traditional 4-year university (public, private or private for-profit). The people who can't/won't complete will be weeded out quickly for a lot smaller cost than a traditional 4-year program and the loans to those guys will not be as large or problematic.
 

marvdmartian

Diamond Member
Apr 12, 2002
5,513
1
81
If you're too foolish and/or lazy, decide on the "easy A" liberal arts degree, then can't find a decent job to pay back your loan, the fairness would be the government telling you tough sh*t, life ain't always fair, we're taking 10% of your income until this is paid off. Forgiving student loans is just another case of giving people a "do over", and teaching them that there are no losers, only winners, and everyone gets a trophy. :thumbsdown:
 

LegendKiller

Lifer
Mar 5, 2001
18,261
68
86
If you're too foolish and/or lazy, decide on the "easy A" liberal arts degree, then can't find a decent job to pay back your loan, the fairness would be the government telling you tough sh*t, life ain't always fair, we're taking 10% of your income until this is paid off. Forgiving student loans is just another case of giving people a "do over", and teaching them that there are no losers, only winners, and everyone gets a trophy. :thumbsdown:
The problem now is that loans are very asymmetrical. The lender takes little/no credit risk and only takes extension risk. However, the borrower takes the ultimate risk when they cannot repay in a reasonable manner, extending really means they delay the rest of their lives, currently forever. In order for risks to be a bit more symmetrical you have to risk base price, charge more interest or cut off riskier borrowers. You do this by actually taking risk, not by saying there is no credit risk (only repayment risk). Without RBP, more creditworthy people subsidize those who aren't since everybody is being charged the same. Furthermore, people who shouldn't be getting credit, are. RBP not only provides risk-adjusted returns but it also creates a natural selection.

The ultimate solution is to make the equation a bit more symmetrical. Force RBP into DirectLoans *AND* allow borrowers to default. Thus, everybody takes some risk, everybody has some problems.

Forgiving loans isn't an "easy way out". It is a way to make sure that both the lender AND the borrower take risks. If the lender doesn't want to lose money, don't extend loans to poor borrowers. If the borrower doesn't want to trash their credit scores and end up potentially owing something for a long time, don't take the loans out.

It's pretty simple.
 

michal1980

Diamond Member
Mar 7, 2003
8,019
43
91
You got it. Oh, don't forgot people (many people) have little respect for doctors these days and view them as money suck vampires who don't care about treating patients.



Well, my desire to be a physician compelled me. It's either I take the loans, or I don't become a physician; the latter is unacceptable.

To give you the run down:

Stafford 207k @ 6.8%
Graduate PLUS 68k @ 7.9%
Graduate PLUS 16k @ 8.5%

I accrued ~24k in interest during school.

These interest rates were(are) non-negotiable.

I did have undergraduate loans as well, but I worked 2 full time jobs during school and took 2 years off before medical school and paid them all off - though my savings were essentially non-existent save for what assets (very little) I had and around 24k in my Roth IRA which I obviously did not contribute to during medical school. This is fairly standard for a medical school student who is putting him or herself through school.



Actually, you can't, not even close, likely not even 3-5 years out. Minimum time spent is residency after school is 3 years. During that time you will be making between 40-55k a year depending on your location. My salary out of school ~ 40, 41.5, 43k net each of those three years. After that it would be possible to find a job for somewhere around 180-200k/year at which point I would have to start paying far more into my aforementioned loans since I didn't even dent them (in fact that drastically increased during my 3 years post graduation) during residency.



I hope this gives a little bit better understand of what the "average self-supporting" medical school grad is doing these days.
It depends on what you are going to do after school/expertise. I know all about how residency works and how crappy that is.

Still after all that 180k-200k, means that if you live like you did during residency you could pay off your 400k in ~3k.

By the age of ~33 your rolling in 180-200k without loans. Its a perfectly reasonable amount of debt.

compare that to someone that gets a liberal arts degree @ a private school. ~200k in loans for a BS degree , making 30-40k
 

TheVrolok

Lifer
Dec 11, 2000
23,253
2,517
136
It depends on what you are going to do after school/expertise. I know all about how residency works and how crappy that is.

Still after all that 180k-200k, means that if you live like you did during residency you could pay off your 400k in ~3k.

By the age of ~33 your rolling in 180-200k without loans. Its a perfectly reasonable amount of debt.

compare that to someone that gets a liberal arts degree @ a private school. ~200k in loans for a BS degree , making 30-40k
Certainly better than someone will a bullshit liberal arts degree. However, at some point even doctors would like to get married, have kids, etc. and, it turns out, that shit isn't cheap. So it's easy to say, "just live poor for another 3-5 years and you're set!" The reality is, some of us would like to get our lives on track and catch up in our early 30's rather than waiting till nearly 40 to start a family, enjoy ourselves a bit, travel, etc... the things everyone else had been doing for a decade.
 

yottabit

Golden Member
Jun 5, 2008
1,198
2
81
I would like there to be an option for financial aid packages to be grouped up like a mortgage. So you finance all X years upfront.

This would probably discourage people from dropping out half-way through

It would also prevent what happened to me and a lot of other students in my classes who got really screwed by evaporating federal and state aid programs. My senior year cost me as much as my sophomore and junior years combined because most of the aid I had been receiving went away. Granted I had to pay hardly anything for my junior year

It's essentially holding kids hostage to have that happen. Trying to be financially responsible you have an idea for the amount of total accumulated debt you will have upon graduation- and then you are forced to either ratchet that up or not get your degree.

I'm not sure if this is a widespread problem, and I didn't graduate too far off from my intended amount, but I think there needs to be a broad-based effort to get people to consider the total cost of education and the amount they will actual owe in the end.

Lending students hundreds of thousands of dollars for useless degrees should be considered sub-prime lending IMO
 

TallBill

Lifer
Apr 29, 2001
46,057
61
91
The averages are very heavily skewed by second, third, fourth generation students. I have a class of roughly 230 students. I'd say probably a third of them aren't paying a dime for school (they incur 0 loans). Then there is another fraction that have their parents covering tuition, but they take loans for room+board and spending cash (about 25% of my loans). Then of course there are the students on military scholarships (which is admittedly few students - perhaps 5%) who take very little, if anything in loans. Also, the "second career" students who already have families or another income in the household that can offset costs very heavily (though, the non-financial burdens on the family are incredible). It can be vary widely. My girlfriend, for example, has about 100-120k less in loans than I do, because she is a local and lived at her parents house during school.

Because I come from a blue color family, paid my way (mostly) through undergraduate school, and entirely through medical school I borrowed every single dime I lived on. I am on the far end of the borrowers spectrum. As I've laid out above, there are just as many people on the opposite end of the spectrum - thus, the average. I get very frustrated when people say it's not so bad based on the average (not implying that you did), because the average is not the reality for many of us. My used car just hit 110k miles and I'm just praying it lasts another 3 years, while some of my colleagues have school paid for and are given a new Mercedes for graduation (to replace the Mercedes they were given for school).
The military option is kinda cool. Take on little or no debt, but make a lower figure to start your career. They do get a sizeable chunk of extra pay compared to normal officers. I'd bet that it just about evens out. Are they locked into 10 year contracts like pilots?
 

TheVrolok

Lifer
Dec 11, 2000
23,253
2,517
136
The military option is kinda cool. Take on little or no debt, but make a lower figure to start your career. They do get a sizeable chunk of extra pay compared to normal officers. I'd bet that it just about evens out. Are they locked into 10 year contracts like pilots?
Yeah they are. It's one of those deals where if you want to do military service it's a great deal, if you don't, it doesn't save you tons of money in the long run. You'll be making far less money in the service than you would as a civilian, so it six one way, half a dozen the other. That said, if you want to serve and stay in for your 20-25, it's a great deal. I contemplated USUHS for school, as that can be a really great deal if you want to serve, but in the end, I decided to remain a civilian.
 

michal1980

Diamond Member
Mar 7, 2003
8,019
43
91
Certainly better than someone will a bullshit liberal arts degree. However, at some point even doctors would like to get married, have kids, etc. and, it turns out, that shit isn't cheap. So it's easy to say, "just live poor for another 3-5 years and you're set!" The reality is, some of us would like to get our lives on track and catch up in our early 30's rather than waiting till nearly 40 to start a family, enjoy ourselves a bit, travel, etc... the things everyone else had been doing for a decade.
I agree, but that's the trade off you make to be a dr.

you lose your 20's, a little bit of your 30's to then be able to really live it up after words.

Think of it this way, money wise, 180-200k puts you around 5 years of work for the guy with a BA degree. so income wise you catch up in 3 years. which means at about 35/36 you DR & BA guy have earned the same.

After that point you explode ahead.

It becomes much trickier when you come other degrees, that require much less sacrifice but the pay is closer to a DR's.
 

morkus64

Diamond Member
Nov 7, 2004
3,302
1
81
Well this is a fun conversation.

The fact of the matter is that education costs are rising and, despite what some of the more conservative voices in this forum will have you believe, not all "useful" jobs which require degrees pay well. Furthermore, I tend to believe that even those from poorer backgrounds should be able to pursue their passion, and not direct the whole of their life toward finding a job which pays well enough to pay off the loans which they had to take out to get the education to get the job which pays well.

In the end, loan forgiveness is a way to get a generation of students who have been at the mercy of a system which is tilted against them back on track while creating an incentive for the lenders to reconsider their tactics.
 

monovillage

Diamond Member
Jul 3, 2008
8,445
0
0
Well this is a fun conversation.

The fact of the matter is that education costs are rising and, despite what some of the more conservative voices in this forum will have you believe, not all "useful" jobs which require degrees pay well. Furthermore, I tend to believe that even those from poorer backgrounds should be able to pursue their passion, and not direct the whole of their life toward finding a job which pays well enough to pay off the loans which they had to take out to get the education to get the job which pays well.

In the end, loan forgiveness is a way to get a generation of students who have been at the mercy of a system which is tilted against them back on track while creating an incentive for the lenders to reconsider their tactics.
Why are the costs rising so fast ? When's the last time you saw an in depth audit of where the billions of dollars spent on public colleges and Universities go?
 
Apr 27, 2012
10,086
58
86
Government is increasing the costs for universities by spending more money into the system. The universities know that they can charge more because the government will just spend more on education.
 

werepossum

Elite Member
Jul 10, 2006
29,876
460
126
You got it. Oh, don't forgot people (many people) have little respect for doctors these days and view them as money suck vampires who don't care about treating patients.



Well, my desire to be a physician compelled me. It's either I take the loans, or I don't become a physician; the latter is unacceptable.

To give you the run down:

Stafford 207k @ 6.8%
Graduate PLUS 68k @ 7.9%
Graduate PLUS 16k @ 8.5%

I accrued ~24k in interest during school.

These interest rates were(are) non-negotiable.

I did have undergraduate loans as well, but I worked 2 full time jobs during school and took 2 years off before medical school and paid them all off - though my savings were essentially non-existent save for what assets (very little) I had and around 24k in my Roth IRA which I obviously did not contribute to during medical school. This is fairly standard for a medical school student who is putting him or herself through school.



Actually, you can't, not even close, likely not even 3-5 years out. Minimum time spent is residency after school is 3 years. During that time you will be making between 40-55k a year depending on your location. My salary out of school ~ 40, 41.5, 43k net each of those three years. After that it would be possible to find a job for somewhere around 180-200k/year at which point I would have to start paying far more into my aforementioned loans since I didn't even dent them (in fact that drastically increased during my 3 years post graduation) during residency.



I hope this gives a little bit better understand of what the "average self-supporting" medical school grad is doing these days.
The averages are very heavily skewed by second, third, fourth generation students. I have a class of roughly 230 students. I'd say probably a third of them aren't paying a dime for school (they incur 0 loans). Then there is another fraction that have their parents covering tuition, but they take loans for room+board and spending cash (about 25% of my loans). Then of course there are the students on military scholarships (which is admittedly few students - perhaps 5%) who take very little, if anything in loans. Also, the "second career" students who already have families or another income in the household that can offset costs very heavily (though, the non-financial burdens on the family are incredible). It can be vary widely. My girlfriend, for example, has about 100-120k less in loans than I do, because she is a local and lived at her parents house during school.

Because I come from a blue color family, paid my way (mostly) through undergraduate school, and entirely through medical school I borrowed every single dime I lived on. I am on the far end of the borrowers spectrum. As I've laid out above, there are just as many people on the opposite end of the spectrum - thus, the average. I get very frustrated when people say it's not so bad based on the average (not implying that you did), because the average is not the reality for many of us. My used car just hit 110k miles and I'm just praying it lasts another 3 years, while some of my colleagues have school paid for and are given a new Mercedes for graduation (to replace the Mercedes they were given for school).
Thanks for these very illustrative posts. This illustrates why doctors earn so much - it is very difficult, both academically and financially, to become a doctor. Besides the education, residency is a hell most of us never experience. And now there's a very real threat that government will decide you earn too much and simply reduce your earning potential to what you "need". Those with a lot in student loans would simply be bankrupt unless they became government employees and had their debt forgiven, and new doctors would come only through government since the cost would otherwise never be amortizable. From there it's just a short hop from who CAN become a doctor to who DESERVES to be a doctor.

I end up paying a lot of attention to SLs for my job and am very wary of this issue. The problem is that all of the research I read coming out of DC indicates that there isn't a huge concern coming from politicians.

Not sure if anybody put it into perspective yet, but here's my rundown.

There are ~$100bn in Private SLs outstanding, SLMA owns the huge proportion of those. Pre-crisis lenders included Access Group (lawschool) and First Marblehead. FM died when they issued a crap-ton of Direct To Consumer loans. DTCs are loans in which the amount needed is not verified by the school (traditional loans made in this manner are called School Channel), thus, the borrower can use them for anything. FMs insurance company, TERI, died after the huge surge in defaults and FM was toast.

The FFELP portion of the world has pretty much ended in 2010. There are ~200bn outstanding loans.

As of today the US Government has ~$700bn of DirectLoans on the DoE balance sheet and are originating ~$120bn per year currently. The originations are partially FFELP refis, which the government has been pushing, and mostly DL new originations.

This really means that out of the 16tr in debt almost 1tr of that is SLs. The government decided to end that program because "wall street" was getting "rich" off of it. The problem is that WS wasn't getting rich. Because of the USG guaranty SLABs (Student Loan ABS) was not priced super well. Underwriting fees for the banks weren't huge and servicing fees for everybody are marginal.

The funny thing is that the servicing fees are going to the same people anyway.


As far as performance goes, you can see that performance, by school, pretty easily. The DoE publishes the Cohort Default Rate here...

http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html

The problem is that they are only on a 3-year basis, so we can't really tell what the true default rate is, yet. Typically default curves will have somewhat of a front-end loaded curve with smaller incremental defaults thereafter, we haven't seen that yet, especially in this environment.

But, as I said, DC thinks this isn't a problem. They say the DL program is profitable, which it may be. Thus they really don't care. They don't even think about the problems of household formation and the drain on GDP this whole thing is going to cause. Furthermore, they say "well, we are getting more co-signers than ever", yet fail to recognize that parents who co-sign and see their kids default will not retire, thus their kids will not get jobs from others moving up to replace the boomers. Even if the parent *thinks* their child is going to default they will keep working, especially in this environment.

But the politicians are sticking their heads in the sand. Dischargability MUST return to at least the privates and most likely the USG loans also. However, it needs to be predicated upon a bankruptcy trustee's complete oversight. Thus, a doctor or lawyer looking for a discharge will not be able to find a quick/easy answer but will need to make payments for 5-10 years, then have a re-eval and a right-sizing of the loan, which may mean a complete dismissal but for higher-end jobs would mean a reduction.

The next thing that happens is that DLs need to be underwritten by school, degree, co-borrower...etc. Not everybody should go to school.

Further, I think an alternative to the "everybody should go to school" is to have the USG offer free 2-years of education at a non-profit community college if grades are good enough to transfer to a traditional 4-year university (public, private or private for-profit). The people who can't/won't complete will be weeded out quickly for a lot smaller cost than a traditional 4-year program and the loans to those guys will not be as large or problematic.
Good info and analysis, thanks. On top of the threat of default is the threat of government deciding after the fact who shouldn't have to pay back their loans at all, in which case we get to pick up that cost.
 

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