US Using Its Youth as a Credit Card? (Another Student Loan Thread)

[Attic]

The Next Massive Bailout: Student Loans



Next bailout is happening now?

Anyone familiar enough with the 10 yr, 10% forgiveness program to talk about it?

The article above, from Time, seems to imply that many loans will be forgiven rather than paid off...

Though, it doesn't seem to give any firm costs...

Uno

I'm familiar with the 20yr plan/bailout for student loan debt. I wasn't aware there was such a thing as the 10yr plan for non profit or gubment employees until recently. Both plans are massively signficant and to their credit extremely helpful for the kids on the backend. I'd argue it has front loaded the kids with debt in the first place to some degree. The kids clamoring for these plans are 100k+ stuck and the one I know is 280k stuck on the 20yr plan making payments based off a 45k income. The bailout allowing for small monthly payments is a life changer. The real thieves are the university admins IMO.

Thing to note about the plan is if you fall off or don't hold to it for whatever reason, while you're in it your debt is getting bigger. The payments are small enough to not even cover interest on the student loan, so each year the debt grows and the bailout for that debt grows.

I think kids should be limited to 5-10k of student loan debt as a first trial. If that means Community College and then a job, then 4yr then so be it.If they can pay back the 5-10k then let them take out more. A lot of the kids in 50k or more have never had to pay back 1k, let alone 50-100x that, I'd call it a trick sticking them with that much debt and making it non discharable at a point in there lives where they can't appreciate how hard it will be to payback large sums of money with interest.

With the way for profit colleges have picked flesh off young up and commers and our governments hap hazard attempts and finding solutions I think other countries have to be looking in at the mess with the D: face.

 

[OverVolt]

5-10k only covers CC if you live at home which isn't an option for everyone.

 

[LegendKiller]

The Next Massive Bailout: Student Loans



Next bailout is happening now?

Anyone familiar enough with the 10 yr, 10% forgiveness program to talk about it?

The article above, from Time, seems to imply that many loans will be forgiven rather than paid off...

Though, it doesn't seem to give any firm costs...

Uno

It has to happen - there is no other way.

The government needs to be honest about the SL program - it is nothing more than another entitlement with no hopes of recouping even 50% of its actual cost.

 

[werepossum]

I'm familiar with the 20yr plan/bailout for student loan debt. I wasn't aware there was such a thing as the 10yr plan for non profit or gubment employees until recently. Both plans are massively signficant and to their credit extremely helpful for the kids on the backend. I'd argue it has front loaded the kids with debt in the first place to some degree. The kids clamoring for these plans are 100k+ stuck and the one I know is 280k stuck on the 20yr plan making payments based off a 45k income. The bailout allowing for small monthly payments is a life changer. The real thieves are the university admins IMO.

Thing to note about the plan is if you fall off or don't hold to it for whatever reason, while you're in it your debt is getting bigger. The payments are small enough to not even cover interest on the student loan, so each year the debt grows and the bailout for that debt grows.

I think kids should be limited to 5-10k of student loan debt as a first trial. If that means Community College and then a job, then 4yr then so be it.If they can pay back the 5-10k then let them take out more. A lot of the kids in 50k or more have never had to pay back 1k, let alone 50-100x that, I'd call it a trick sticking them with that much debt and making it non discharable at a point in there lives where they can't appreciate how hard it will be to payback large sums of money with interest.

With the way for profit colleges have picked flesh off young up and commers and our governments hap hazard attempts and finding solutions I think other countries have to be looking in at the mess with the D: face.

I'm sorry, but someone who borrows $280k for a degree worth $45k deserves to be paying on it his or her whole life. If nothing else, snapping up that discretionary income might prevent him or her from doing something else monumentally stupid.

It has to happen - there is no other way.

The government needs to be honest about the SL program - it is nothing more than another entitlement with no hopes of recouping even 50% of its actual cost.

Government be honest?

Yeah, you're going to need a Plan 'B' on this one.

 

[werepossum]

You don't think that pushing that *all* kids need to go to college and *all* can see it as "affordable" by taking out more "flexible" paying government guaranteed loans, is pushing the same thing as the "ownership society" through wide payment terms and government guaranteed loans?

Furthermore, a student loan default doesn't offer "mild consequences", as you do take a major hit to your credit score, they are fully reported by the servicers, just like any other loan. In fact, there is a government rehab program which offers a credit rehab if the loan is rehabed. Naturally they layer on even more fees to the balance to "make a profit" on this program. The re-default rate for those loans is very high. Sure, the 10% program *may* not result in a default first (they usually do) but the implications are still major for debt-to-income ratios.

*IF* students get access to the program they only have to pay 10%, which is the heart of the problem here, a huge portion of students can only afford the 10%, which will result in huge losses to the Direct Loan program.

Hell, they could turn 100% of SL borrowers into IBR/PYE and it would only result in millions being debt slaves for 25 years.

Two things. First, I honestly have no problem with either the student loan program or the "ownership society". Both allow smart people to make their lives better. Yes, stupid people can screw up their lives with them, but one can't pre-determine if someone will be stupid or even just unlucky - one can have a well thought out, reasonable plan and still end up roadkill in either.

Second, I don't think it's fair to call someone a debt slave simply because they have to pay back a loan, regardless of its purpose. If we get to the point where people are not expected to pay back loans, we can't really have a society with credit or fractional reserve banking, which would be severely limiting.

 

[LegendKiller]

Two things. First, I honestly have no problem with either the student loan program or the "ownership society". Both allow smart people to make their lives better. Yes, stupid people can screw up their lives with them, but one can't pre-determine if someone will be stupid or even just unlucky - one can have a well thought out, reasonable plan and still end up roadkill in either.

Second, I don't think it's fair to call someone a debt slave simply because they have to pay back a loan, regardless of its purpose. If we get to the point where people are not expected to pay back loans, we can't really have a society with credit or fractional reserve banking, which would be severely limiting.

I have no problem with either also, but I do have a problem with asymmetrical lending relationships and unsound credit policies. I make credit decisions every day, analyzing this very problem, determining what, ultimately, will happen.

You can very easily make a smart credit decision in this area though. Do you lend somebody who will make $30k, 100k+ in student loans? No.

That is a debt slave, somebody which you know cannot pay back the loans but you lend them the money anyway and they have no hope of getting out of them.

An investor takes capital risk, a borrower takes payment risk. It is symmetrical. In SLs, it is not symmetrical and that is the problem.

It's why they can, and do, lend unlimited amounts of money to degrees that are economically viable. It is also why tuition increases outstrip inflation by 2.5x and why you actually need those loans.

That is a feedback loop. You can get unlimited amounts of money for shitty degrees because the lending relationship is asymmetrical. It needs to be asymmetrical so you can borrow unlimited amounts. You need to borrow unlimited amounts because tuition keeps going up on shitty degrees.

Rinse, repeat.

 

[werepossum]

I have no problem with either also, but I do have a problem with asymmetrical lending relationships and unsound credit policies. I make credit decisions every day, analyzing this very problem, determining what, ultimately, will happen.

You can very easily make a smart credit decision in this area though. Do you lend somebody who will make $30k, 100k+ in student loans? No.

That is a debt slave, somebody which you know cannot pay back the loans but you lend them the money anyway and they have no hope of getting out of them.

An investor takes capital risk, a borrower takes payment risk. It is symmetrical. In SLs, it is not symmetrical and that is the problem.

It's why they can, and do, lend unlimited amounts of money to degrees that are economically viable. It is also why tuition increases outstrip inflation by 2.5x and why you actually need those loans.

That is a feedback loop. You can get unlimited amounts of money for shitty degrees because the lending relationship is asymmetrical. It needs to be asymmetrical so you can borrow unlimited amounts. You need to borrow unlimited amounts because tuition keeps going up on shitty degrees.

Rinse, repeat.

With that, I can pretty much agree. Sometimes it's even good degrees though. I've known people with degrees in engineering, accounting and finance who have never held jobs in those fields, simply because they are not sharp enough to get and hold a good-paying job in those fields. School /= real life. And the flip side is that even a shitty degree can be a real door-opener if it's from a prestigious school.

 

[Attic]

I'm sorry, but someone who borrows $280k for a degree worth $45k deserves to be paying on it his or her whole life. If nothing else, snapping up that discretionary income might prevent him or her from doing something else monumentally stupid.

I generally agree. Some specifics may change minds, though there is no way a young adult without income or assets is loaded up with 280k of debt unless that debt is non dischargeable. What is particularly irksome looking in is that the tuition costs have been pushed up by government interference and kids are getting stuck with non dischargeable debt in the skyrocketing tuition wake. It's a double whammy, because it pushes up tuition and it also loads kids with debt they have no business getting under. Though in this case, as in others, government is bailing the indvidual out.

 

[Zebo]

It's riculous kids even need student loans. When my mom went to Berkeley in early 70s it was FREE!! When i went to Calpoly in early 90s it was about $200 a quarter. I worked part time at a hardware store. Now my oldest is paying about 16K for UCLA. Obviously not affordable on a part time job so I help. Otherwise he'd chain himself to debt for life like so many are doing. Something is really wrong with direction country is headed.

 

[LegendKiller]

It's riculous kids even need student loans. When my mom went to Berkeley in early 70s it was FREE!! When i went to Calpoly in early 90s it was about $200 a quarter. I worked part time at a hardware store. Now my oldest is paying about 16K for UCLA. Obviously not affordable on a part time job so I help. Otherwise he'd chain himself to debt for life like so many are doing. Something is really wrong with direction country is headed.

In part they need student loans because of student loans.

If you were a school and you got 100% free money from an ignorant and naive population, backed by the government, you would just charge whatever you wanted. Since nobody watches the purse strings, and the federal gov't doesn't care, then you can do whatever you want.

States used to fund the schools more and the schools needed to justify budgets to local legislatures but post-.bombs that has declined significantly.

This is why administration has skyrocketed, pretty buildings are the norm...etc.

 

[halik]

One upside is that while the SL/debt slave will suppress consumption for the next 10-20 years, it's not a systemic issue the way real estate was. That is, people not paying enough for their student loans does not devaluate my education/the asset on my balance sheet and induce me to default.

What really needs to happen is schools sharing the underwriting risk and price degrees appropriately. NYU won't let you in with on a 200K loan for a medieval poetry degree if they have to take 50% of the future haircut.