Student loan debt piles up to $1.16 trillion: NY Fed

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BLADEMDA

BLADEMDA

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So it appears student loan program is another Federal program in the Red.
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That bubble is about to burst. Paying mine off (250K and I feel lucky with that number), MAXING 401K, and building an FU account. Working more hours than I did as a resident/fellow. Hopefully I'll be in the black in 3-4 years
 
(Bloomberg) -- Student-loan delinquencies increased at the end of 2014, a troubling sign that Americans are failing to keep up with payments as education debt climbs, according to the Federal Reserve Bank of New York.

Data from the New York Fed released Tuesday showed 11.3 percent of student loans were delinquent in the final three months of 2014, up from 11.1 percent in the prior quarter. The share of auto loans at least 90 days overdue also rose, climbing to 3.5 percent from 3.1 percent the prior period, even as fewer credit card and mortgage loan payments were late.

“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student-loan balances and delinquencies is concerning,” Donghoon Lee, research officer at the New York Fed, said in an e-mailed statement. “Student-loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”


The nation’s student-loan balance climbed by $31 billion last quarter to $1.16 trillion. That makes it the largest source of debt after mortgages, which gained $39 billion to $8.2 trillion in the fourth quarter. Auto-loan debt increased by $21 billion to $955 billion.

Education loan balances have skyrocketed over the past decade. In the first quarter of 2005, outstanding student debt stood at $363 billion -- about a third of the current level, based on a 2013 New York Fed report.

Delinquency rates for student loans probably understate the actual situation, according to today’s report. About half of the student loans are in deferment, in grace periods or in forbearance, temporarily removing them from the repayment cycle.

Education debt delinquency levels have come down since 2013, when the rate reached 11.8 percent, yet remain elevated from around 6 percent a decade ago, according to the New York Fed. Student loans are the type of debt most likely to be past-due, having surpassed credit-card delinquency rates in 2012.
 
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Today federally backed loans represent a majority of total lending, and those loans offer benefits that allow undergraduates to defer until the student graduates from school as well as provide a six-month post-graduation grace period. These deferred student loans are not included in the past due balance, but are included in the total balance from which the delinquency rate is derived. According to the FRBNY, after adjusting the past due rate calculation to exclude borrowers in grace periods and forbearance, the delinquency rate is 21 percent, compared to the unadjusted original rate of 10 percent.

"In sum, student loan debt is not just a concern for the young," the report states. "Parents and the federal government shoulder a substantial part of the postsecondary education bill. Moreover, the student loan delinquency picture is not fully captured in the broad statistics since a significant proportion of borrowers and balances are not yet in the repayment cycle."
 
This should be all anyone needs to know to decide for themselves if relying on loan forgiveness in high income/high net worth individuals is a reality or a fantasy that will get cut/phased out by income/limited, etc. before they will benefit. (But not before their interest doubles the debt.)
Buy a few things that you really want and will enjoy, live modestly for a few years, maximize your retirement opportunities, and crush the debt before it crushes you.
Then do whatever you want.
 
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Difference between the housing bust and the student loan market is its extemely hard to walk away from student loans.

I know so many well off people who walk or short sold their homes even though they could afford it.

Let Americans swim for themselves with student loan debt.

There is a reason European housing markets didn't collapse. It's cause it's really hard to default on a home loan in Europe.

It's amazing what people will do if you give them an escape clause.

If there were no mortgage forgiveness act 2007-2013. No short sales. And housing would be have corrected much sooner.

But if Feds give student loans a break it will open the flood gates with people left and right trying to get out of debt.
 
The real crime here is that student loan interest rates are stuck at 6.8% even though mortgage rates are hovering around 3.8%. The government needs to allow students a way to refinance their loans to a lower rate without losing the protections that federal loans provide (vs. refinancing through a private lender).
 
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Spinach Dip said:
no, ty
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The data-driven nature of all our products allows us to really lower the cost of processing these loans while continuing to make better and better decisions, which straight-up translates into better rates for borrowers,” says Beryl.

New Graduates of Anesthesiology Residencies may be able to get better rates going forward from private companies than the Federal govt. As defaults continue to rise the rates will rise so the private market place will likely be superior in terms of rates to those deemed to be the best risk.

In addition, loan terms of 60 months-72 months should be rewarded with much lower interest rates instead of the usual rates most borrowers pay.
 
“The data-driven nature of all our products allows us to really lower the cost of processing these loans while continuing to make better and better decisions, which straight-up translates into better rates for borrowers,” says Beryl.

Earnest’s big data approach will also allow it to offer applicants a “check your rate” feature that will give them a quote in under two minutes, after the applicant inputs her employer, education level, school, job title, income and savings. (The company also does a soft pull on credit that won’t affect the applicant’s score.)

The refinancing product will feature a high level of flexibility, allowing borrowers to pay off their loans pretty much however they like. Borrowers can switch between fixed and variable rates. (The closest product offering by a competitor is Common Bond’s hybrid loan, but the rate is fixed for the first five years and then variable the second five). “People tend to agonize over that decision, so we give customers the ability to switch,” says Beryl.

They can swap between, say, a 15-year loan to a five-year loan with a more attractive interest rate — a feature appealing to, say, poor medical residents who can expect more generous paychecks in the future. (Meanwhile, bankers who decide to go the nonprofit route could make the opposite switch.)
 
Biochemist21 said:
The real crime here is that student loan interest rates are stuck at 6.8% even though mortgage rates are hovering around 3.8%.
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Is that right? My oldest is starting college this year, and when he filled out his FAFSA it listed Stafford loans at 3.something% among the things he might be eligible for.

Right now ed.gov says direct undergrad loans are 3.86% although next year it says they'll be 4.66%.
 
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pgg said:
Is that right? My oldest is starting college this year, and when he filled out his FAFSA it listed Stafford loans at 3.something% among the things he might be eligible for.

Right now ed.gov says direct undergrad loans are 3.86% although next year it says they'll be 4.66%.
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Graduate loan is higher.
 
Student loan defaults rates are very misleading. You need to see the real breakdown.

Way back in the days when these Student loan laws were passed that prevented defaults except in cases of permanent disability or death. The lawmakers tried to make it look like these rich doctors and lawyers were defaulting on their loans and getting away with murder.

That was an easy sell to the public. No one wants to see rich doctors and lawyers not paying back their loans. That's how these laws got passed.

But as Lee Corso of Espn says "not so fast my friend"

Look closely into the breakdown of student loan default.

Where are the majority of defaults? Read folks. The data hasn't changed over the past 25-30 years. Back in the late 80s the highest default rates were in these vocational and beauty schools. Not legit colleges. Default rates remain very low when you look at traditional 4 year colleges.

Now the issue is we have these for profit schools like University of Phoenix. These for profit schools loans show signifcantly higher default rates than traditional 4 year colleges.

So always examine ur data points closely. Break them down. Its not sexy in the media to point to continued low Default rates with traditional 4 year colleges. Just not sexy. They like to group the barber school loans with the for profit schools all together.
 
pgg said:
Is that right? My oldest is starting college this year, and when he filled out his FAFSA it listed Stafford loans at 3.something% among the things he might be eligible for.

Right now ed.gov says direct undergrad loans are 3.86% although next year it says they'll be 4.66%.
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All of my med school loans are 6.8%.
 
BLADEMDA said:
“The data-driven nature of all our products allows us to really lower the cost of processing these loans while continuing to make better and better decisions, which straight-up translates into better rates for borrowers,” says Beryl.

Earnest’s big data approach will also allow it to offer applicants a “check your rate” feature that will give them a quote in under two minutes, after the applicant inputs her employer, education level, school, job title, income and savings. (The company also does a soft pull on credit that won’t affect the applicant’s score.)

The refinancing product will feature a high level of flexibility, allowing borrowers to pay off their loans pretty much however they like. Borrowers can switch between fixed and variable rates. (The closest product offering by a competitor is Common Bond’s hybrid loan, but the rate is fixed for the first five years and then variable the second five). “People tend to agonize over that decision, so we give customers the ability to switch,” says Beryl.

They can swap between, say, a 15-year loan to a five-year loan with a more attractive interest rate — a feature appealing to, say, poor medical residents who can expect more generous paychecks in the future. (Meanwhile, bankers who decide to go the nonprofit route could make the opposite switch.)
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aneftp said:
Student loan defaults rates are very misleading. You need to see the real breakdown.

Now the issue is we have these for profit schools like University of Phoenix. These for profit schools loans show signifcantly higher default rates than traditional 4 year colleges.

So always examine ur data points closely. Break them down. Its not sexy in the media to point to continued low Default rates with traditional 4 year colleges. Just not sexy. They like to group the barber school loans with the for profit schools all together.
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Sorry to disagree Blade (I agree with you frequently), but as a consumer of student loans, I foresee massive dangers and userous practice if we allow for-profit student loan companies to work alongside with for-profit colleges.
 
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pgg said:
Wow, that's pretty awful.
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No it's not awful. 1/4 of my loans were 8.25%.

My brothers and sisters were all 8.25%.

Of course there was a time from 2003-2005/6 where one could consolidate to around 2-3%. But it wasn't a big stretch of time.

Like people getting 2.75% fixed 15 year mortgages. You have a narrow time to get those rates.
 
Spinach Dip said:
Sorry to disagree Blade (I agree with you frequently), but as a consumer of student loans, I foresee massive dangers and userous practice if we allow for-profit student loan companies to work alongside with for-profit colleges.
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I don't think that's as dire as you would think. I don't think many for-profit student loan companies would put up loans for for-profit colleges because they know they are much higher risk - or they'd nail those students with higher interest rates.
 
courtnes said:
I don't think that's as dire as you would think. I don't think many for-profit student loan companies would put up loans for for-profit colleges because they know they are much higher risk - or they'd nail those students with higher interest rates.
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Given: A) that student loans cannot be forgiven via bankruptcy (or practically any other way), and B) the well-documented predatory and selfish nature of Wall Street and its partners in crime....

I expect things to get far worse if the gov't privatizes the student loan industry.
 
Biochemist21 said:
The real crime here is that student loan interest rates are stuck at 6.8% even though mortgage rates are hovering around 3.8%. The government needs to allow students a way to refinance their loans to a lower rate without losing the protections that federal loans provide (vs. refinancing through a private lender).
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Really? A risky, easy to default on loan, from public money, should have the same APR as a mortgage, guaranteed with real estate?
 
Spinach Dip said:
Given: A) that student loans cannot be forgiven via bankruptcy (or practically any other way), and B) the well-documented predatory and selfish nature of Wall Street and its partners in crime....

I expect things to get far worse if the gov't privatizes the student loan industry.
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So what if loans cannot be forgiven? If the genius defaults on the loan, after investing $100K in some worthless degree, it still won't get paid back.
 
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FFP said:
Really? A risky, easy to default on loan, from public money, should have the same APR as a mortgage, guaranteed with real estate?
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Haven't checked recently, but my understanding is that they are not easy to default on. Death or disability was the only way out last time I checked. Maybe moving overseas makes a judgement lien less enforceable, but it doesn't go away.
 
dr doze said:
Haven't checked recently, but my understanding is that they are not easy to default on. Death or disability was the only way out last time I checked. Maybe moving overseas makes a judgement lien less enforceable, but it doesn't go away.
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Of course they can default on them (meaning that they fail to make the minimum payment). And if they have no property and (almost) no income, the lender is stuck. How many young people take these mega loans, with no collateral, to go to second-rate law schools, or even just colleges, and then wake up with a miserable job, if any? That's why the APR is and should be much higher than the mortgage rate.

They just cannot discharge the loans through bankruptcy. Meaning that they are stuck with the loans but, when enough of them will be unable to pay, they and their families will vote themselves a nice loan forgiveness program out of everybody else's pockets.
 
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FFP said:
Of course they can default on them (meaning that they fail to make the minimum payment). And if they have no property and (almost) no income, the lender is stuck. How many young people take these mega loans, with no collateral, to go to second-rate law schools, or even just colleges, and then wake up with a miserable job, if any? That's why the APR is and should be much higher than the mortgage rate.

They just cannot discharge the loans through bankruptcy. Meaning that they are stuck with the loans but, when enough of them will be unable to pay, they and their families will vote themselves a nice loan forgiveness program out of everybody else's pockets.
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These defaults can and do follow people. Garnishment of wages, tax refunds, social security payments are routine. Inability to qualify for a mortgage or car loan, Credit checks are standard as part of job applications, etc. Don't disagree that enough people may one day vote to "forgive" these loans. But right now non payment of these loans is a major pain in the ass for anybody who wants to move up the ladder.
 
dr doze said:
These defaults can and do follow people. Garnishment of wages, tax refunds, social security payments are routine. Inability to qualify for a mortgage or car loan, Credit checks are standard as part of job applications, etc. Don't disagree that enough people may one day vote to "forgive" these loans. But right now non payment of these loans is a major pain in the ass for anybody who wants to move up the ladder.
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I understand that part. I was just arguing that all those things don't decrease the risk for the lenders, so of course unsecured educational loans should have a much higher APR than mortgages.
 
FFP said:
Really? A risky, easy to default on loan, from public money, should have the same APR as a mortgage, guaranteed with real estate?
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dr doze said:
Haven't checked recently, but my understanding is that they are not easy to default on. Death or disability was the only way out last time I checked. Maybe moving overseas makes a judgement lien less enforceable, but it doesn't go away.
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dr doze said:
These defaults can and do follow people. Garnishment of wages, tax refunds, social security payments are routine. Inability to qualify for a mortgage or car loan, Credit checks are standard as part of job applications, etc. Don't disagree that enough people may one day vote to "forgive" these loans. But right now non payment of these loans is a major pain in the ass for anybody who wants to move up the ladder.
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@FFP - I understand what you're saying, that mortgages are backed by physical property, while educational loans are just backed by the promise of future earnings, and thus the inherent risk is higher. As is typical of most investments, a perceived higher risk by the lender means that they can charge a higher interest rate. This is all well and good with for-profit institutions; however, the government is not (read: shouldn't be) in the market to profit from student loans.

I agree with @dr doze. People aren't going to default in droves. If they try, that's gonna get remediated in a hurry when people realize that they can't escape liens/garnishments without a pine box.
 
http://www.forbes.com/sites/jeffrey...ment-should-get-out-of-student-loan-business/

This is a reasonably well-written article which brings up some good objective data points. I didn't realize that the vast majority of loan profits came from graduate students while undergrad loans were near break-even. However, I disagree with the ultimate conclusion that the government should get out of the loan game. "Rather than calling for the government to lower interest rates to eliminate the profit, we should be calling on the government to get out of the student loan business and let investors earn the profits." That should be the whole point of having the govt back student loans, so that the system operates on a break-even basis. No private financial institution would back a system without profits. Given that the article is from Forbes, I'm hardly surprised, but I'm trying to present the contrasting argument.

For the record, I'm fine with the govt making up for a few billion dollar loss on undergrad loans with a few billion dollar profit on grad loans, and would even promote the practice. But if/when I'm the person designated as in-charge of everything ;), I would create a system where interest rates would recalculate on an annual basis so as to be revenue-neutral (again with deference given to undergrads).

BLADEMDA said:
The Federal government should scale back its loan programs to students and allow the private market to take a larger share: http://www.forbes.com/sites/laurash...jumps-into-the-student-loan-refinancing-game/
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@BLADEMDA - I appreciate you presenting this topic and always appreciate your input in this forum, but to this point I have to respectfully disagree. Based on the link you presented, I don't see why govt-based direct lending can't coexist with a free-market system of private-equity refinancing programs. This way if an individual feels that Earnest's program suits their needs better, then that person is free to leave govt protections and refinance. If not, then just stick with the govt program. There's no need for the govt to stop functioning as the primary loan originator.

Here's a few more good articles to peruse. The second one demonstrates how student loan debt has blossomed by approx $900 billion in 2004-2014 (I like colorful graphs, so what?).
http://blogs.wsj.com/numbers/congatulations-to-class-of-2014-the-most-indebted-ever-1368/
http://www.newyorkfed.org/microeconomics/hhdc.html#/2014/q4
 
After reading some of these horror stories, I'm so glad I stacked my student loan situation the way I did. And that the new job has loan forgiveness in the contract of the new job.

Still shocks me as to the amount one has to take out just to make it through undergrad, let alone medical school.
 
Just remember loan forgiveness even student loan forgiveness by the government doesn't mean all is forgiven. What I mean is even if you do public service for 10-20 year. You will still owe taxes on student loan amount forgiven.

http://mobile.nytimes.com/2012/12/1...wers-a-tax-time-bomb.html?pagewanted=all&_r=0

One of the reasons "short sales" were never heard of before 2007 wasn't because they were new. Short sales have always existed. Except government allowed forgiveness of 1099 debt and that's why short sales exploded. Now the law has expired. Notice short sells have tanked.
 
@Biochemist21: I actually question the reason for gov. loans in the first place. It's pretty well known that quality (for-profit colleges don't fit here) education correlates with increased income (less in recent years, admittedly), and that the bulk of students stay in states that they graduate in. Education is an investment for a state, that pays off in the form of increased tax receipts down the line. Issuing loans to individuals (a high risk venture) to fund colleges/universities vs. simply funding the universities and distributing the risk over the population of the state (who will benefit from increased tax receipts) is a roundabout way of doing things. In effect, those of us who complete a college education end up being taxed twice: once in the exorbitant interest we're charged on the loans, and again once we're out utilizing the education we've received.
 
The private sector would do a better job at screening students for educational loans. Those deemed "low risk" like Med Students would benefit from lower interest rates vs those deemed "high risk" like some vocational school loans. In fact, the private sector may not even make some of those loans at all forcing some vocational schools out of business.

I'm all for allowing access to our educational system and providing a means to obtain that access. But, why is it the federal govt. has to be the source for that funding? As things stand now the govt. will be raising rates to make up for all the defaults and ballooning tuition costs at some very marginal schools given to some very marginal students.

Let's take an example below of private vs public funding:

Sally is a 18 year old who just got accepted to her Public State University and small, private college. Sally wants to pursue a degree in education (BA plus Masters) in order to become an Elementary School teacher. The cost of the 6 year degree (4 plus 2) at the Public State School is $46,000 but Sally qualified for $14,000 in grants, Aid, etc.
The cost of the 6 year degree at the private college is $208,000 but Sally qualified for $86,000 in grants, aid, scholarship, etc.

Total Loans:

Public: 32,000
Private: 122,000

Sally decided to go to the Private College because she heard that Obama would eventually forgive her loans as a teacher and she would have income based repayment only.

Hence, we as taxpayers, are stuck with the bulk of Sally's loan and must pay for it through taxes. Society didn't receive anything for Sally's choice to attend a private vs public college as both degrees were in education. Instead, the current system ENCOURAGED Sally to go the Private route and shift the burden of those loans to the taxpayer.

Under a private sector loan system most companies would NOT make such a loan to Sally because teachers don't earn enough income to pay off the note.
Sally would have been forced to go to the Public University if she wanted to pursue a low paying job like a teacher. Her ability to borrow money would be limited to a certain amount based on her expected income. The Taxpayer wouldn't be burdened with her poor decisions and the foolishness of the Federal govt. in loaning excessive money to someone who can never pay it back.

It's clear that an out of control Federal govt. needs a more LIMITED role in our lives but should encourage the private sector to do those things which would benefit the overall welfare of the country. Educational loans are vitally important to the American dream of success but the private sector should be making those loans.
 
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The report’s authors predict that these teachers and other indebted graduates won’t be able to earn enough money to afford to pay back their loans. That will leave taxpayers holding the bag, effectively subsidizing schools of education.

The recent spike in debt for graduate degrees should also focus policymakers’ attention on the lack of loan limits for students pursuing graduate degrees and income-based repayment programs that include loan forgiveness benefits. The debt statistics in this New America report suggest that graduate and professional students are likely borrowing at levels that will lead to substantial waves of student loan forgiveness in the coming years.
 
Medical School at $278,000 Means Even Bernanke Son Has Debt

http://www.bloomberg.com/news/artic...-278-000-means-even-bernanke-son-carries-debt

David Lin, an anesthesiology resident at St. Barnabas Medical Center in Livingston, New Jersey, owes about $325,000. Because of accrued interest, the figure has risen 25 percent since he graduated from Chicago Medical School two years ago. He makes payments of about $450 per month.
 
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You have to take student loans as one factor among many. Paying your loans off is great and I can't wait for mine to be paid off, but focusing single-mindedly on student loan repayment isn't the only or even the most financially beneficial approach. My retirement savings, kids' college funds, and home purchase have all made more money than I would have saved by putting the same money toward my loans. The value of my accounts and home might drop of course, but it is unlikely that they won't provide a better return than aggressive loan repayment would save me over the next 20 years.

Loan forgiveness is a joke. I went to state school for undergrad because the cost for private was too high and financial aid inadequate. Why should I now bail out people for their bad decisions? What are they bankers?
 
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nolagas said:
You have to take student loans as one factor among many. Paying your loans off is great and I can't wait for mine to be paid off, but focusing single-mindedly on student loan repayment isn't the only or even the most financially beneficial approach. My retirement savings, kids' college funds, and home purchase have all made more money than I would have saved by putting the same money toward my loans. The value of my accounts and home might drop of course, but it is unlikely that they won't provide a better return than aggressive loan repayment would save me over the next 20 years.

Loan forgiveness is a joke. I went to state school for undergrad because the cost for private was too high and financial aid inadequate. Why should I now bail out people for their bad decisions? What are they bankers?
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You do realize that public medical school tuition now is nearly as high or even higher than private medical schools right?
 
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Baller MD said:
You do realize that public medical school tuition now is nearly as high or even higher than private medical schools right?
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I was talking about undergrad, it isn't doctors who will get loan forgiveness
 
Dash2021 said:
@Biochemist21: I actually question the reason for gov. loans in the first place. It's pretty well known that quality (for-profit colleges don't fit here) education correlates with increased income (less in recent years, admittedly), and that the bulk of students stay in states that they graduate in. Education is an investment for a state, that pays off in the form of increased tax receipts down the line. Issuing loans to individuals (a high risk venture) to fund colleges/universities vs. simply funding the universities and distributing the risk over the population of the state (who will benefit from increased tax receipts) is a roundabout way of doing things. In effect, those of us who complete a college education end up being taxed twice: once in the exorbitant interest we're charged on the loans, and again once we're out utilizing the education we've received.
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I agree that a college education correlates with increased earning potential, and by association, increased tax revenues from that individual. I disagree that issuing student loans is a "high risk venture" when you look at how hard it is to discharge the debt. Issuing loans is fundamental to allow people to choose the college that best fits them. The problem I see with your strategy is it neglects private universities and out-of-state public universities.
 
BLADEMDA said:
The private sector would do a better job at screening students for educational loans. Those deemed "low risk" like Med Students would benefit from lower interest rates vs those deemed "high risk" like some vocational school loans. In fact, the private sector may not even make some of those loans at all forcing some vocational schools out of business.
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The only thing privatizing student loans would improve on, compared to government-backed loans, would be the fact that the debt would be dischargeable in bankruptcy.

But it's not a good solution, regardless. Privatizing student loans would inevitably result in less access to higher education to poorer students. They'd be a higher credit risk owing to higher dropout rates, fewer parents who are financially able to cosign, etc. This isn't really going to be acceptable to a country that broadly views higher education as the ultimate socioeconomic equalizer. The government got into the student loan business in the first place because the free market couldn't/wouldn't go there.

An educated public is as much a national interest as an interstate highway system or a Navy capable of floating a MEU to the other side of the world for half a year at a time just in case someone needs an asskicking on short notice. Like roads, education is something the government ought to be funding, very broadly, and not deferring to capitalists.


Regardless, what we have now is a trainwreck. Virtually anything would be preferable to the tuition inflation that has fed on unlimited loan availability regardless of creditworthiness or academic performance, and the bankruptcy-proof debt slavery that follows.



nolagas said:
Loan forgiveness is a joke. I went to state school for undergrad because the cost for private was too high and financial aid inadequate. Why should I now bail out people for their bad decisions? What are they bankers?
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I confess I have some difficulty mustering sympathy for those seeking loan forgiveness.

I "paid" for medical school by promising to serve in the military for 7 years after residency, and here I am. Government forgiveness for medical school loans? Are they going to give me my years back, and spot me the salary differential between private practice and military payback? Of course not. I'm basically content with my choice, despite some drawbacks, and I'm fulfilling the terms of my contract.

Just talking about undergrad - what about all the people who did ROTC, or went to a Service Academy? Should they be released from their service obligations? Why not, if everyone else is getting their loans forgiven?

Seems to me the average West Point grad is more "deserving" of loan forgiveness and a clean slate than the poetry major who finds he can't make loan payments on Starbucks pay.
 
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pgg said:
The only thing privatizing student loans would improve on, compared to government-backed loans, would be the fact that the debt would be dischargeable in bankruptcy.

But it's not a good solution, regardless. Privatizing student loans would inevitably result in less access to higher education to poorer students. They'd be a higher credit risk owing to higher dropout rates, fewer parents who are financially able to cosign, etc. This isn't really going to be acceptable to a country that broadly views higher education as the ultimate socioeconomic equalizer. The government got into the student loan business in the first place because the free market couldn't/wouldn't go there.

An educated public is as much a national interest as an interstate highway system or a Navy capable of floating a MEU to the other side of the world for half a year at a time just in case someone needs an asskicking on short notice. Like roads, education is something the government ought to be funding, very broadly, and not deferring to capitalists.


Regardless, what we have now is a trainwreck. Virtually anything would be preferable to the tuition inflation that has fed on unlimited loan availability regardless of creditworthiness or academic performance, and the bankruptcy-proof debt slavery that follows.
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:thumbup:
Yes, yes to all of this.
 
Biochemist21 said:
I agree that a college education correlates with increased earning potential, and by association, increased tax revenues from that individual. I disagree that issuing student loans is a "high risk venture" when you look at how hard it is to discharge the debt. Issuing loans is fundamental to allow people to choose the college that best fits them. The problem I see with your strategy is it neglects private universities and out-of-state public universities.
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High-risk, in the sense that you are charging an individual to be responsible for a large sum of money, as opposed to a large population. I'm uncomfortably familiar with how hard it is to discharge student debt under the current system.

Neglecting private/OOS colleges and universities is intentional. In this scenario the quality education is provided via tax revenue in total, but only at state schools. Should the student choose an instate private, they would recieve the same tuition guarantee as an instate public and have to make up the difference in private sector loans. OOS schools they'd get a % of tuition and again make up the remainder in private loans. Achieves the goal of broadly available higher education to all income levels, and allows the student to take on as much/little debt as they want (and even lets the private sector pick up responsibility for approval thereof). The compact between society and individual is not one sided here: society picks up the tab, but in the setting of its choosing (aka lowest overall cost to it).

pgg said:
The only thing privatizing student loans would improve on, compared to government-backed loans, would be the fact that the debt would be dischargeable in bankruptcy.

But it's not a good solution, regardless. Privatizing student loans would inevitably result in less access to higher education to poorer students. They'd be a higher credit risk owing to higher dropout rates, fewer parents who are financially able to cosign, etc. This isn't really going to be acceptable to a country that broadly views higher education as the ultimate socioeconomic equalizer. The government got into the student loan business in the first place because the free market couldn't/wouldn't go there.

An educated public is as much a national interest as an interstate highway system or a Navy capable of floating a MEU to the other side of the world for half a year at a time just in case someone needs an asskicking on short notice. Like roads, education is something the government ought to be funding, very broadly, and not deferring to capitalists.

Regardless, what we have now is a trainwreck. Virtually anything would be preferable to the tuition inflation that has fed on unlimited loan availability regardless of creditworthiness or academic performance, and the bankruptcy-proof debt slavery that follows.


I confess I have some difficulty mustering sympathy for those seeking loan forgiveness.

I "paid" for medical school by promising to serve in the military for 7 years after residency, and here I am. Government forgiveness for medical school loans? Are they going to give me my years back, and spot me the salary differential between private practice and military payback? Of course not. I'm basically content with my choice, despite some drawbacks, and I'm fulfilling the terms of my contract.

Just talking about undergrad - what about all the people who did ROTC, or went to a Service Academy? Should they be released from their service obligations? Why not, if everyone else is getting their loans forgiven?

Seems to me the average West Point grad is more "deserving" of loan forgiveness and a clean slate than the poetry major who finds he can't make loan payments on Starbucks pay.
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Agreed about availability of education being both in the national interest and being the great equalizer. I wouldn't have gone to college, much less med-school w/out having guaranteed fed. loans. As a result of those being available my state is going to make a bundle off me in my lifetime via taxes, as opposed to my possibly being a burden otherwise (was working low paying factory work prior to college).

As to loan forgiveness: it really depends on how it's done. Forgiveness for paying the minimum income based repayment for 10 years? Fantastic scam if you can work it, terrible idea in practice.

I think you hit the nail on the head though: All the examples you gave of "deserving" loan forgiveness repaid their debt in service. I honestly wouldn't care to repay the loan debt of the ***** that graduated with a theater major if they earned it through by working for a charity, serving the under served etc.

Some form of assistance paying for higher education is going to be necessary going forward, though. As the market saturates with more and more college educated candidates, wages are going to be driven down. This is an excellent situation from the standpoint of multi-nationals and the country overall, as we'll be able to provide a highly educated and diverse workforce cheaper than most countries. The flip side of this is that we can't expect the people to shoulder the entirety of their educational debt burden. Medical education is already heading down this road now, with the huge burden of debt slamming face first into declining reimbursements. I don't think it's unreasonable to think that in the next 15 years or so even the historical draws of status and service aren't enough to entice the people we actually want in medical school to sign up for the crushing debt and years of training.

Biochemist21 said:
http://www.edcentral.org/defaulters/

Based on these data, what we really need to be focusing on is how to keep people in school.
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^^This. As annoyed as I am at people who actually graduate with ridiculous unemployable majors, the "lazy college grad" is pretty much a myth. Regardless of if a person's "interpersonal studies" degree makes in sense, they at least had to put forth a modicum effort and be able to deal with people long enough to graduate. Which sets them far enough apart from the rest of the workforce as to at least maintain gainful employment more often than not. Even if they end up as the manager of a corner gas station, they are at least a manager and will value their credit enough to prioritize repayment.
 
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pgg said:
The only thing privatizing student loans would improve on, compared to government-backed loans, would be the fact that the debt would be dischargeable in bankruptcy.
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Agree with just about everything you said except this. Private loans are NOT dischargeable in bankruptcy. Basically, no matter the kind of loan you take out, you either pay it off, get forgiveness, or die with it.
 
DPTMD said:
Agree with just about everything you said except this. Private loans are NOT dischargeable in bankruptcy. Basically, no matter the kind of loan you take out, you either pay it off, get forgiveness, or die with it.
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Are all private loans like that, or just private student loans? I thought private loans were basically unsecured debt.
 
Just educational loans. The private lenders lobbied Congress for the exception. Prior to that it was only federal loans, but private bankers worked there magic to be included in 1984.
 
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