The Student Loan Problem

[Jhhnn]

If you go through a good trade union's apprenticeship program you can buy that same house at 22 today. That's about the only good blue collar jobs left for someone without a ton of experience. Most people however prefer to wait a few years for a nicer house.

As if there is more than very limited access to apprenticeships. The downsizing of industry & the demise of unions have seen to that. You reference a herd of unicorns.

There are lots of youngsters in college simply because the Job Creators haven't created enough jobs for all of them to do anything else. They're being parked in high rent spaces.

Dude, you missed an opportunity to foam about bankers just to pre-accuse me of racism. Your table needs to be re-aligned.

I merely noted your use of a standard right wing propaganda attack template intended to demean the victim. It's a multipurpose tool you seem to favor.

 

[DCal430]

What is ridiculous is the mixed use of state agencies, non-profit, and for profit companies as servicers of direct loans. I don't see why they don't stop using Navient and Nelnet as servicers for new loans, when they have the state of Pennsylvania is servicing other direct loans more efficiently.

Even if the cost is lower with Navient and Nelnet vs PHEAA's (Agency of the State of Pennsylvania), it is still better to use another government agency, less profit in the hands of private companies is always better. Think of it like this, $100 to Navient is $100 to the greedy rich, while $100 to the state of Pennsylvania is $100 to help the people of Pennsylvania.

 

[Wreckem]

What is ridiculous is the mixed use of state agencies, non-profit, and for profit companies as servicers of direct loans. I don't see why they don't stop using Navient and Nelnet as servicers for new loans, when they have the state of Pennsylvania is servicing other direct loans more efficiently.

Even if the cost is lower with Navient and Nelnet vs PHEAA's (Agency of the State of Pennsylvania), it is still better to use another government agency, less profit in the hands of private companies is always better. Think of it like this, $100 to Navient is $100 to the greedy rich, while $100 to the state of Pennsylvania is $100 to help the people of Pennsylvania.

I have PHEAA as my servicer. I loathe them and wish I could change servicers. They have proven to be incompetent every time I have had to deal with them. My wife and I have different servicers. We are both on IBR and PSLF. She has had ZERO problems with her servicer. I have had too many to count at this point.

 

[LegendKiller]

What is ridiculous is the mixed use of state agencies, non-profit, and for profit companies as servicers of direct loans. I don't see why they don't stop using Navient and Nelnet as servicers for new loans, when they have the state of Pennsylvania is servicing other direct loans more efficiently.

Even if the cost is lower with Navient and Nelnet vs PHEAA's (Agency of the State of Pennsylvania), it is still better to use another government agency, less profit in the hands of private companies is always better. Think of it like this, $100 to Navient is $100 to the greedy rich, while $100 to the state of Pennsylvania is $100 to help the people of Pennsylvania.

What metrics are you using to measure PHEAA as being better? Reject rate? Complaint rate?

According to the CFPB PHEAA is only first in one qualitative, non-borrower, survey category. It is third in actually collecting the loans and dealing with borrowers.

The two major profit servicers are best in actually getting Taxpayer Money back.

Yeah, bark up a diff tree.

 

[OverVolt]

They will let you pay less than interest and let the loan compound out of control.

That is bad.

 

[Jhhnn]

What metrics are you using to measure PHEAA as being better? Reject rate? Complaint rate?

According to the CFPB PHEAA is only first in one qualitative, non-borrower, survey category. It is third in actually collecting the loans and dealing with borrowers.

The two major profit servicers are best in actually getting Taxpayer Money back.

Yeah, bark up a diff tree.

What if getting taxpayer money back isn't really the point at all?

Given the diminished opportunities in this country even for college graduates, a lot of that is like squeezing blood out of a turnip & likely always will be.

All too often, the promise of what you can get from a college degree is just a come-on for the debt-slavers.

Yeh, sure, it all sounds peachy, but where the fuck are the jobs?

Structurally, it's starting to look more like a very expensive lottery ticket than anything else.

 

[nickqt]

What if getting taxpayer money back isn't really the point at all?

Given the diminished opportunities in this country even for college graduates, a lot of that is like squeezing blood out of a turnip & likely always will be.

All too often, the promise of what you can get from a college degree is just a come-on for the debt-slavers.

Yeh, sure, it all sounds peachy, but where the fuck are the jobs?

Structurally, it's starting to look more like a very expensive lottery ticket than anything else.

Yes, this.

Depending on the degree, and whether nepotism will work in your favor, and whether the economy has recently crashed, or a substantial part of an industry recently shipped overseas because FreeMarket knows best.

 

[werepossum]

How is it more cost efficient to run? You have to pay servicers who process the docs and service the loans. You have to hire people to manage the portfolio in addition to the Servicers who manage it also. The only place the gov't "saved" money was in funding the loans directly with treasuries. However, the problem there is that they are then direct debt of the US govt and are not funded efficiently. The Servicer's rebated excess interest to the government, barely eeking out a profit on the servicing. The bond owners didn't make a huge profit either since the bonds sometimes even traded *inside* of treasuries.

The "profit" the government realizes is a joke. Everybody who knows anything about student loans knows it is a joke.

It would be a joke if its intentions was to break even rather than to provide political cover for a giveaway.

As if there is more than very limited access to apprenticeships. The downsizing of industry & the demise of unions have seen to that. You reference a herd of unicorns.

There are lots of youngsters in college simply because the Job Creators haven't created enough jobs for all of them to do anything else. They're being parked in high rent spaces.

I merely noted your use of a standard right wing propaganda attack template intended to demean the victim. It's a multipurpose tool you seem to favor.

Chattanooga has several hundred such "unicorns" in the electrical apprenticeship program alone, with hundreds more in the other trades. But please do keep foaming frothy hatred, it's sooo amusing.

 

[werepossum]

What is ridiculous is the mixed use of state agencies, non-profit, and for profit companies as servicers of direct loans. I don't see why they don't stop using Navient and Nelnet as servicers for new loans, when they have the state of Pennsylvania is servicing other direct loans more efficiently.

Even if the cost is lower with Navient and Nelnet vs PHEAA's (Agency of the State of Pennsylvania), it is still better to use another government agency, less profit in the hands of private companies is always better. Think of it like this, $100 to Navient is $100 to the greedy rich, while $100 to the state of Pennsylvania is $100 to help the people of Pennsylvania.

Ah, the wisdom of North Korea shines through again. Speaking of unicorns.

 

[fskimospy]

This is incorrect. That's like saying that if there weren't bankruptcy dischargability there wouldn't be personal loans, or credit cards, or really any debt, secured or unsecured, since the lender always takes unsecured risk if the asset is at a deficiency.

This is incorrect. I didn't say that there would be no unsecured debt without prohibition on dischargeability, I said there wouldn't be lots of $30k unsecured loans to 18 year olds.

Furthermore, it assumes that the lack of debt would mean the lack of education. The lack of debt would mean education would *have* to become cheaper, otherwise the Universities would go out of business.

It does not assume that at all. That's why I said I thought student loans are a fundamentally unsound way of funding education. I would be down to eliminate them entirely.

This isn't like a car that has better safety features, more gadgets, higher quality...etc. This is people talking to kids about material people have written about millions of times over.

My dad learned the same shit, at the same school, for 1/10th the price with professors who earned only a few times what they do now.

The dead weight comes in the form of buildings and bureaucracy.

The causes of tuition increases varies widely between the type of university we are talking about. Here's a good piece talking about how those cost drivers vary:

http://www.washingtonpost.com/blogs...part-iii-the-three-reasons-tuition-is-rising/

 

[Jhhnn]

Chattanooga has several hundred such "unicorns" in the electrical apprenticeship program alone, with hundreds more in the other trades.

The whole argument is mere assertion in support of a very misleading premise. It's like Jeb saying people just need to work more hours.

An online school is headquartered there & serves a large geographical area. Their website claims 30,000 apprentices nationwide in a country of over 300M. Do the math.

http://www.chattanoogaelectricaljatc.com/www

 

[Jhhnn]

Ah, the wisdom of North Korea shines through again. Speaking of unicorns.

Explain why bankers deserve a cut off the top of govt guaranteed loans at all, particularly wrt a program that's obviously not intended to make money.

If they were taking risk they'd earn their profit, but there is no risk.

 

[LegendKiller]

This is incorrect. I didn't say that there would be no unsecured debt without prohibition on dischargeability, I said there wouldn't be lots of $30k unsecured loans to 18 year olds.



It does not assume that at all. That's why I said I thought student loans are a fundamentally unsound way of funding education. I would be down to eliminate them entirely.



The causes of tuition increases varies widely between the type of university we are talking about. Here's a good piece talking about how those cost drivers vary:

http://www.washingtonpost.com/blogs...part-iii-the-three-reasons-tuition-is-rising/

There would be loans to those who are pursuing degrees that can pay them back. Other degrees would cheapen and reach an equilibrium where they would be able to pay the amount back.

Loans are a fundamental way of funding education, provided they are underwritten prudently and not just given away.

I know the cost drivers vary, I have talked about it many times on here. I do think one of the biggest drivers is that state legislatures handed off the oversight to the USG so they could reduce state budgets. No local oversight = out of control spending.

 

[LegendKiller]

Explain why bankers deserve a cut off the top of govt guaranteed loans at all, particularly wrt a program that's obviously not intended to make money.

If they were taking risk they'd earn their profit, but there is no risk.

Because they can usually allocate capital better and it's better than issuing tons and tons of gov't debt without consideration to other factors.

 

[LegendKiller]

What if getting taxpayer money back isn't really the point at all?

Given the diminished opportunities in this country even for college graduates, a lot of that is like squeezing blood out of a turnip & likely always will be.

All too often, the promise of what you can get from a college degree is just a come-on for the debt-slavers.

Yeh, sure, it all sounds peachy, but where the fuck are the jobs?

Structurally, it's starting to look more like a very expensive lottery ticket than anything else.

If you're going to give away money, then give it away, stop beating around the bush and stop fucking with the rest of the economy by destroying household formation. That's all they are pretty much doing now.

Where the fuck are the jobs? They have been given to illegals, H1Bs and countries that fuck with their currency in order to supply super cheap goods.

 

[Jhhnn]

Because they can usually allocate capital better and it's better than issuing tons and tons of gov't debt without consideration to other factors.

Pure obfuscation. Bankers are free to extend credit into that market w/o govt guarantees.

What are the other factors besides cutting the bankers out of a ride on the gravy train?

Govt can suspend interest if they want, let the value of the debt be inflated away. They can also forgive debt for whatever reasons they choose.

Bankers? Please. They count the money they're supposed to make as profit before they even get it.

 

[Exophase]

Structurally, it's starting to look more like a very expensive lottery ticket than anything else.

Maybe if you pick your major at random. But there are plenty of fields out there that strongly benefit from a degree. Would you want to hire an electrical engineer without at least a bachelor's degree? I wouldn't. Even if they had an impressive portfolio of independent work. There's too much theoretical and practical knowledge that a decent university education will provide, that's difficult to get independently (while the information is all out there, the facilities and the knowledge of exactly what to learn is not)

On the other hand, it doesn't take a lot of foresight to know something like a gender studies degree will have little practical application.

The degrees that are a real crapshot are in the fields that have a reputation for being extremely lucrative but require extremely expensive and lengthy educations. Especially where demand is being (often unknowingly) trimmed due to technological advances reducing need for individuals. Like law and pharmacy. That's where you hear about people getting saddled with $300-500k or more in debt (like in this thread), and while they can get jobs in their fields they just don't pay enough.

Everyone should do research on what sort of jobs are available and what's projected to be available when they look into university expenses. And they should continue doing that research throughout their education to see if they need to change course, especially before going into graduate school, law school, med school, etc. I also think that lenders need to start looking more carefully into what the student is pursuing with the money.

 

[LegendKiller]

The main points are these:

1. We can't give money to everybody to pursue degrees that are not economically sustainable.

2. We can't give money to everybody to go to college because not everybody will complete college.

3. We can't give money away without considering the cost, and/or quality, of the institution.

4. We can't keep loans as non-discharagable.

5. We can't keep the US Taxpayers on the hook.


As a result, you can either take over all education and fund it through the government, paying for everything for everybody, or you can only allow those who can and want to go to college compete for a limited number of spots.

OR

You can find a away to align interests between the borrowers, schools, and US taxpayers through a risk-sharing agreement. The US Government will lend students money, at maybe 10% interest for the first year, 8% for the 2nd, 6% for the third, and 3% for the 4th. If the student completes school they will get all loans cut to 3%. The school takes the first 10% of losses. If losses exceed the national average by any more than 20% (or a standard deviation or two), the school will be immediately placed on a watch list. If losses do not fall to 120% within 2 years they are cut off, forever. Tuition will only be able to increase by CPI. Any increases above CPI have to come from private funding. Debt will be dischargable, subject to long-term means testing. For example, doctors who have graduated and completed residency and such will not be able to discharge unless they have some mitigating factor (disability).

I am sure others might have some ideas to incorporate but this would be a decent start.

I'd prefer that over just giving away unlimited amounts of money.

Another thought would be to make the first two years of community college free, subject to a tuition cap of pre-free costs + CPI. That way the non-completers will flush out in 2years and you won't go on to fund them forever.

 

[LegendKiller]

Pure obfuscation. Bankers are free to extend credit into that market w/o govt guarantees.

What are the other factors besides cutting the bankers out of a ride on the gravy train?

Govt can suspend interest if they want, let the value of the debt be inflated away. They can also forgive debt for whatever reasons they choose.

Bankers? Please. They count the money they're supposed to make as profit before they even get it.

If you want others to fund it, such as pension funds or 401ks, as they do, then you need some additional assurances in order to fund a bulk of it. Or you could not provide assurances and go with Sallie Mae Bank route and provide co-signers.

Again, what do you consider the "gravy train"? A 5yr FFELP senior bond yields maybe L + 60 at this point. At the lowest point that might have been L + 30. On 200bn in bonds that's $1.2bn of interest per year going into the pension funds. Not great, eh?

So forgive it. Why inflate it away? I no problem letting this problem go away, because nobody is being helped by it, but the problem needs fixing before that happens.

 

[Jhhnn]

If you're going to give away money, then give it away, stop beating around the bush and stop fucking with the rest of the economy by destroying household formation. That's all they are pretty much doing now.

And now, whatever shit you can fling. Explain how college loans destroy household formation.

Where the fuck are the jobs? They have been given to illegals, H1Bs and countries that fuck with their currency in order to supply super cheap goods.

All by the hand of our own jerb creatin' capitalist lootocracy.

 

[Jhhnn]

If you want others to fund it, such as pension funds or 401ks, as they do, then you need some additional assurances in order to fund a bulk of it. Or you could not provide assurances and go with Sallie Mae Bank route and provide co-signers.

Again, what do you consider the "gravy train"? A 5yr FFELP senior bond yields maybe L + 60 at this point. At the lowest point that might have been L + 30. On 200bn in bonds that's $1.2bn of interest per year going into the pension funds. Not great, eh?

So forgive it. Why inflate it away? I no problem letting this problem go away, because nobody is being helped by it, but the problem needs fixing before that happens.

More obfuscation. Returns on investment are justified by risk & there isn't any for lenders w/ govt guarantees. Or should we subsidize wealth holders?

 

[LegendKiller]

And now, whatever shit you can fling. Explain how college loans destroy household formation.



All by the hand of our own jerb creatin' capitalist lootocracy.

DTI/PTI, students living at home because they cannot afford to leave alone, young adults too afraid of starting business because they already have too much debt, nobody willing to give them loans (PTI/DTI) to start small businesses...etc.

Sure, I 100% agree to that. Not sure where you're getting the idea that I am *against* solving this problem by getting rid of illegals, H1Bs, and offshoring. I am disgusted that it's gone down this way and want to help American jobs thrive again. I'm certainly no fan of it, nor this idea of shoveling tons of money at colleges for no gain.

Perhaps you need to dial it down a little there sparky.

 

[LegendKiller]

More obfuscation. Returns on investment are justified by risk & there isn't any for lenders w/ govt guarantees. Or should we subsidize wealth holders?

What you call obfuscation is massive ignorance on your part, nothing more. Your zeal to blame "bankers" and think that they are making gobs of money is only limited by your idiocy on the subject. Perhaps you should shut the fuck up, sit down, and learn something, before you prattle on and make yourself look like a bigger fuckup than you are.

There's certainly risk for bondholders, as we now see. There's payment timing (extension from payment methods, shortening for the same, economic risk...etc), servicer reject rate, market liquidity, trading premiums, political variables. There's term structure of interest rates, QE, among many other factors, that make these bonds yield less, or more, than general obligation bonds.

There are tons of risks to any investment. How about the risk that a bond in a AAA only investment account gets downgraded to AA? Hell, that even happens to US Treasuries, given S&P's actions. What do you do then? If all 3 agencies go AA, then you have to sell unless you change your investment policies, or get a waiver from the client.

 

[JSt0rm]

There are tons of risks to any investment. How about the risk that a bond in a AAA only investment account gets downgraded to AA? Hell, that even happens to US Treasuries, given S&P's actions. What do you do then? If all 3 agencies go AA, then you have to sell unless you change your investment policies, or get a waiver from the client.

I know there will be a ripple effect but I think most people dont give a fuck if rich people are left holding the bag of not worth shit student loan debt.

They are getting paid interest for the risk. So looks like the risk is more then everyone told them. Oh well. Life goes on. In fact if I lost a shit ton on this stuff and still had sizable wealth I would feel inclined to work my money harder to make it back. So maybe it will be a positive.

 

[DucatiMonster696]

I know there will be a ripple effect but I think most people dont give a fuck if rich people are left holding the bag of not worth shit student loan debt.

They are getting paid interest for the risk. So looks like the risk is more then everyone told them. Oh well. Life goes on. In fact if I lost a shit ton on this stuff and still had sizable wealth I would feel inclined to work my money harder to make it back. So maybe it will be a positive.

Ahahahahaha.....you think rich people as a whole will be left holding the bag. That is about the funniest thing I've ever heard. Thanks for the laugh.

Anyways...This is like déjà vu because I know I've made similar points as the OP in the past about the insanity of student loans and how it has pushed students into cycle of debt via a false premise that college is for everyone. Along with pushing the falsehood that degrees are of all equal value when it comes to the rate of return on future income in a post-guaranteed student loan era.

Additionally I mentioned (outside of the OP's comments) that this system was changed at the behest of major schools lobbying for a change in lending rules, alongside banks, schools and politicians pushing the false premise that EVERYONE (including those D and C students) should go to college to gain from the "experience". Even though the reality is most students, especially poorer and less academically adept students end up dropping out with large amounts of debt or graduating with a near useless degree and again large amounts of debt.

But guess there is no stopping a speeding train of lockstep, tunnel vision ideology and circle-jerk narratives.