Spoke to a financial advisor about paying for PsyD

[ABL38361]

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After discussing IBR (which applies to the work environment of most psychologists), his response was "Well hell, why wouldn't you do it?". He even suggested that I take out as much student loans as possible to live comfortably and invest.

The guy seemed pretty legit. Years of experience at a very prestigious company. VERY nice office in a very nice part of the city. However, I can't help but want to ask you guys about his advice.

Thoughts?

 

[RileyG]

He even suggested that I take out as much student loans as possible

 

[KayJay85]

This has to be a joke. Well, do not count on IBR saving your butt. Also, take a moment to look into the real scam that for-profit schools are running. Agapeblue shared these links in another thread:

http://www.walletpop.com/2010/11/29/for-profit-college-misconduct-complaints-under-investigation/http://www.walletpop.com/2010/11/29/for-profit-college-misconduct-complaints-under-investigation/

http://www.walletpop.com/2010/03/04/rule-1-of-college-avoid-for-profit-colleges/

Looks like people are finally looking into this and a crack down is coming:

According to the U.S. Department of Education, students at for-profit schools make up 11% of all higher education students, 26% of all student loans and 43% of all loan defaulters. With more than a quarter of for-profit school getting 80% of their revenues from federal student aid programs, the Obama administration coordinated 18 months of negotiations to devise the new rules.

 

[erg923]

You must really, really want us to start a Tea Party thread.

 

[KayJay85]

You must really, really want us to start a Tea Party thread.

Not to take the wind out of your sails, but Obama is as far from Tea Party as you can get... and it is his administration that is pushing the policy change on this. 😉

Not trying to spark a political debate. Just keeping it straight and giving credit where it is due.

 

[AgapeBlue]

You must really, really want us to start a Tea Party thread.

A discussion of political ideology might not be a bad use of this thread...I feel a little trolled...

 

[erg923]

Ugh, I'm still figuring out my personal political views. If I wanted to argue them I'd belong to another board...

 

[KayJay85]

A discussion of political ideology might not be a bad use of this thread...I feel a little trolled...

Yeah. This just feels like a ploy to stir the pot. There is no way the convo is going to end well. Hoping for a

 

[DrGero]

Not to take the wind out of your sails, but Obama is as far from Tea Party as you can get... and it is his administration that is pushing the policy change on this. 😉

I'm not holding my breath. Obama also said he'd close Guantanamo in a year, have transparent government, was the Nobel-Peace-Prize-Guy (now fighting three wars at once).... I'm not impressed by the grand promises of that guy anymore.

 

[KayJay85]

I'm not holding my breath. Obama also said he'd close Guantanamo in a year, have transparent government, was the Nobel-Peace-Prize-Guy (now fighting three wars at once).... I'm not impressed by the grand promises of that guy anymore.

Does that change the fact that he is the first president to bring this issue to the table? Since for-profits hit the market no one has taken a close look at their marketing, charges for tuition, or outcomes (e.g. graduates of for-profits accounting for 43% of all defaults). Regardless of how you feel about the President I am keeping it simple. His administration is getting the ball rolling on this. They have already put 18 months into it according to the links provided. I support that effort. Will he get it resolved? I don't know. The House is making it very clear that they will obstruct any move he makes--not because they disagree on principle (they should fully support reform of student loan policies, given conservative values), but because they are consumed with 2012 and don't give a flip about what happens between now and then--or actually want to see things worsen so Obama catches the blame. If this last debacle (holding up the budget to try to take down NPR and planned parenthood) didn't make that clear to you, then... never mind.

 

[ABL38361]

This is not a trolling thread, I am not starting a political discussion, and I'm serious. Aside a major revision required by Congress, what would stop me from taking out as many student loans as I want to attend school and repay via IBR? I would certainly qualify, and my financial advisor thinks it would be a good idea.

What, specifically, would stop this plan from working?

 

[O Gurl]

This is not a trolling thread, I am not starting a political discussion, and I'm serious. Aside a major revision required by Congress, what would stop me from taking out as many student loans as I want to attend school and repay via IBR? I would certainly qualify, and my financial advisor thinks it would be a good idea.

What, specifically, would stop this plan from working?

I am not well versed on investment returns. Whether it "works" or not depends on where you invest it. All of that is a moot point to me because the idea is not morally on the up and up. The federal student loan system was not created to help you "live comfortably and invest". The fact that you would consider borrowing the max amount for that purpose is very unsavory. I typically despise when people extrapolate into someone's professional ability based on what is posted on this board, but I am worried about your moral compass and your working with vulnerable patients if you see nothing wrong with borrowing student money under false pretenses. If you want a business investment, apply for a small business loan or look for private investors. Do not gamble with federal funds intended to help people pursue education. We (the taxpayers) do not pay into the loan system to support that venture.

Now, if you are asking whether IBR "works", then I would say that it is a crap shoot. You would have to bank on this option being available 6-7 years from now. If things go well, it will not. The way it works now, IBR is based on your gross household income. So if you did invest the loan money and it was bringing in income, that would be factored into the calculation of your repayment amount. In general, there are too many unknown/uncertain factors. It is not a good idea to risk it.

 

[erg923]

This is not a trolling thread, I am not starting a political discussion, and I'm serious. Aside a major revision required by Congress, what would stop me from taking out as many student loans as I want to attend school and repay via IBR? I would certainly qualify, and my financial advisor thinks it would be a good idea.

What, specifically, would stop this plan from working?

I think its because you are counting on a government program, that can be changed or disappear altogether, to rescue you from your financial decisions. Putting all your faith (and financial future/well being) in one of Uncle Sams programs seems dicey to say the least..not to mention somewhat shortsighted and financially irresponsible. Money doesn't grow on trees. The government recoups that money from all of us...the taxpayer. I'm sure you can understand why people would not be pleased that their tax dollars are being utilized so people can borrow exceedingly or needlessly, right?

I would also mention that on your Master Promissory note, which is a legal document (meaning you can theoretically be charged with a crime if your perjure yourself on it), you are signing off that your using said loans for edu-related puposes only (tuition, books, housing, food). I wouldn't recommend starting off your graduate education by committing a felony.

 

[erg923]

I'm not holding my breath. Obama also said he'd close Guantanamo in a year, have transparent government, was the Nobel-Peace-Prize-Guy (now fighting three wars at once).... I'm not impressed by the grand promises of that guy anymore.

Its cool, Berkeley has welcomed the detainees with open arms...so Ive heard...🙄

 

[DrGero]

Does that change the fact that he is the first president to bring this issue to the table?

The President has a history of making grand promises about issues that matter and then doing nothing to address said issues. I don't expect this to be much different, and I'm not saying this to be reflexively partisan, really (I voted for him). I don't give him much credit for the grand promises.

If this last debacle (holding up the budget to try to take down NPR and planned parenthood) didn't make that clear to you, then... never mind.

I'm all for deficit reduction. Honestly, I think my student loan debt is being threatened to be made meaningless in a wave of hyperinflation probably within a few short years from now. I'm not for the meaningless grandstanding of folks like Boehner and Paul Ryan, though. I'm more a Ron/Rand Paul kind of guy.

 

[DrGero]

This is not a trolling thread, I am not starting a political discussion, and I'm serious. Aside a major revision required by Congress, what would stop me from taking out as many student loans as I want to attend school and repay via IBR? I would certainly qualify, and my financial advisor thinks it would be a good idea.

What, specifically, would stop this plan from working?

Nothin' really. It's a risk/reward kind of thing. You're risking some debt and betting that political considerations won't allow Congress to make substantial changes to the IBR program within the next decade. I'd say the odds are definitely in your favor, but perhaps not overwhelmingly.

I'd invest in gold and silver. Particularly silver, ETFs and physical if you can. 🙂

 

[KillerDiller]

What, specifically, would stop this plan from working?

What about the fact that you can only borrow $20,500 a year in Stafford loans? That is often not enough to fully cover tuition at these schools, let alone leave you enough left over to invest.

 

[AcronymAllergy]

What about the fact that you can only borrow $20,500 a year in Stafford loans? That is often not enough to fully cover tuition at these schools, let alone leave you enough left over to invest.

I'd wondered about that as well. I've taken out loans some years in my program, and that was the max I was offered, so I'd always tried to figure out where the extra money was coming from--I'm guessing loans from private banks/companies?

 

[guy8720]

The remaining balance/living cost is often covered by a GradPlus Loan, a direct government loan, but at a higher interest rate than the Stafford. The maximum borrowable amount is much higher for this loan.

 

[AcronymAllergy]

The remaining balance/living cost is often covered by a GradPlus Loan, a direct government loan, but at a higher interest rate than the Stafford. The maximum borrowable amount is much higher for this loan.

Ahh yeah, I'd forgotten about GradPlus loans, thanks for the info.

 

[voyeurofthemind]

The remaining balance/living cost is often covered by a GradPlus Loan, a direct government loan, but at a higher interest rate than the Stafford. The maximum borrowable amount is much higher for this loan.

Wouldn't the high interest rates of Grad Plus loans and a conservative expected return on investment for most investment vehicles (mutual funds, stocks) make this not feasible to actually return a profit?

 

[AcronymAllergy]

Wouldn't the high interest rates of Grad Plus loans and a conservative expected return on investment for most investment vehicles (mutual funds, stocks) make this not feasible to actually return a profit?

From what I can tell based on a quick Google search, the current Grad Plus interest rate is 7.9%. I'm not particularly well-informed on average return rates for most forms of investment, so I'm uncertain how much financial sense it would make. Morally, I tend to agree with others in the thread who've said that taking out additional education loan money for the purposes of investing and profit isn't exactly on the up-and-up.

 

[Student4Life0]

Wow, this idea is not only terrible but also immoral. And the PsyD degree continues to have a bad reputation due to brilliant ideas like this....

 

[ABL38361]

A lot of people are assuming that, just because a financial advisor suggested I invest (kind of what he does for a living, makes sense for him to jump to that), that I will take money out of student loans and do just that. That would be incorrect.

I believe he was just emphasizing that I shouldn't worry about how much direct federal loans (which will cover only the estimated cost of attendance at the school) I should take out. On an IBR loan repayment program, it wouldn't matter all that much if I had 200k or 400k in student loans (just arbitrary numbers here, 400k is quite exaggerated), my monthly payment would be the same, about 10% of my income. This is subject to change in the event that I did not need to take out a "huge" (whatever that means) amount and/or got a decent job.

For instance, say I take out 200k in student loans and land a job making 60k a year. 10% income = 6k per year in student loan repayment. 10 year IBR = 60k paid (140k I wouldn't have to pay), 25 year = 150k paid (50k I wouldn't have to pay). I'll most likely qualify for a 10 year repayment program.

IBRinfo.org reports that, "IBR and Public Service Loan Forgiveness were passed into law through the College Cost Reduction and Access Act of 2007, and any major changes to these programs would require new legislation to be passed by Congress and signed by the president. This is highly unlikely to occur in the foreseeable future, and we recommend that borrowers proceed with confidence."

So, even though it seems as though borrowing 200k or so for a PsyD is financially irresponsible, it is investing in my own earning potential, and I most likely (assuming a new act of Congress isn't passed) will not have to pay it all back.

So why not go on with it?

 

[O Gurl]

On an IBR loan repayment program, it wouldn't matter all that much if I had 200k or 400k in student loans (just arbitrary numbers here, 400k is quite exaggerated), my monthly payment would be the same, about 10% of my income. This is subject to change in the event that I did not need to take out a "huge" (whatever that means) amount and/or got a decent job.

For instance, say I take out 200k in student loans and land a job making 60k a year. 10% income = 6k per year in student loan repayment. 10 year IBR = 60k paid (140k I wouldn't have to pay), 25 year = 150k paid (50k I wouldn't have to pay). I'll most likely qualify for a 10 year repayment program.

IBRinfo.org reports that, "IBR and Public Service Loan Forgiveness were passed into law through the College Cost Reduction and Access Act of 2007, and any major changes to these programs would require new legislation to be passed by Congress and signed by the president. This is highly unlikely to occur in the foreseeable future, and we recommend that borrowers proceed with confidence."

So, even though it seems as though borrowing 200k or so for a PsyD is financially irresponsible, it is investing in my own earning potential, and I most likely (assuming a new act of Congress isn't passed) will not have to pay it all back.

So why not go on with it?

Because it is wrong! Holy sh**.

The 140K you "wouldn't have to pay" is money that taxpayers have to eat! You are NOT investing in your earning potential if you end up earning a fraction of what you borrowed. There are much cheaper routes to a 60K/year job. What you describe is called raping the gov't.

 

[ABL38361]

Because it is wrong! Holy sh**.

The 140K you "wouldn't have to pay" is money that taxpayers have to eat! You are NOT investing in your earning potential if you end up earning a fraction of what you borrowed. There are much cheaper routes to a 60K/year job. What you describe is called raping the gov't.

IBR is to help students who make a significantly lower salary compared to their student debt. I believe I fit the description.

And sure it's investing in my earning potential. Having this degree (in a job I want) will allow me to earn more money in my lifetime.

 

[busybusybusy]

IBR is to help students who make a significantly lower salary compared to their student debt. I believe I fit the description.

And sure it's investing in my earning potential. Having this degree (in a job I want) will allow me to earn more money in my lifetime.

I think the point that was being made is that it will be at the expense of our nation's taxpayers, not you paying for your education.

 

[aequitasveritas]

IBR is to help students who make a significantly lower salary compared to their student debt. I believe I fit the description.

And sure it's investing in my earning potential. Having this degree (in a job I want) will allow me to earn more money in my lifetime.

And where does that money come from? It comes from tax payers; most of whom will never attend college. Blue collar workers are funding your education.
Ogurl means that you are chipping away at a collective good called independence. I agree and I am in violation myself.

You state alot of "me" and "I want" kinda things. The point of the posters here is that you arent taking into consideration the source of the loan money and not whether you "could" take out that much and what it would mean for you, but whether you SHOULD take out that much, and what it will mean for others.

 

[O Gurl]

Ok, I am going to try this without the excessive use of exclamation points.

IBR is to help students who make a significantly lower salary compared to their student debt. I believe I fit the description.

And sure it's investing in my earning potential. Having this degree (in a job I want) will allow me to earn more money in my lifetime.

The problem that I have with your perspective is that you are approaching this knowing that you will earn a lot less than what you are borrowing. IBR is fine if say, a med student who planned to specialize in orthopedic surgery takes out 200K in loans fully expecting to be pulling in a quarter of million in a few years of practice. If something happens to where his plans fall through, like he is is diagnosed with rheumatoid arthritis and can no longer practice surgery and then practices as a general practitioner earning about 110K, then IBR would allow him to pay less. The fact that you just "want" this job is not enough to justify willingly taking excess debt that you haven't a snowball's chance in hell of repaying. If that is the case, look for lower cost options to practicing in mental health (like an LCSW) OR do what you have to do to be competitive for a funded program (those do exist you know). But buying your way to a doctorate is not the way to go... esp. at the taxpayer's expense.

 

[AgapeBlue]

IBR is to help students who make a significantly lower salary compared to their student debt. I believe I fit the description.

That description fits a large number of people who are choosing to go to an un-funded program (partial or otherwise). You are knowingly accruing a large amount of student debt with the intent of allowing the tax payers the privilege of paying it off for you.

And sure it's investing in my earning potential. Having this degree (in a job I want) will allow me to earn more money in my lifetime.

Not really. I'll be the one investing in your future (along with the other taxpayers) by taking over your debt.

I don't think you really want our thoughts or opinions, but here's mine: Your posts come off very selfish and that does not bode well for someone who is venturing into the mental health field. What you're suggesting is very self-centered and short sighted.

There are other, more financially sound ways for you to "invest" in your future and have a degree/job you want without putting the financial burden on other people.

I am making sound financial decisions regarding my academic career so that I can earn my doctoral degree without any debt and how dare you assume I want to help you pay off your loans..

 

[psychapps]

IBR is to help students who make a significantly lower salary compared to their student debt. I believe I fit the description.

Yes, that is the purpose of IBR. However, I don't think the government's intention with IBR was to create a situation where grad students max out their loans so that they can "live comfortably and invest", as your advisor is recommending. Aside from the independently wealthy, what grad student lives comfortably?

Student loans were originally set up to allow lower-income individuals a chance to obtain a college education. Heck, they were the only way I was able to go to college. I viewed my loans as a generous gesture on the part of the government to help people like me get an education. And I felt obligated to repay that gesture; for one thing, so that the government could continue to offer these loans to future students.

It's really frustrating to watch how the student loan system has been perverted, both by for-profit schools and students who think that it's okay to take out more money than they can ever possibly repay. 🙁

 

[AgapeBlue]

Heck, they were the only way I was able to go to college. I viewed my loans as a generous gesture on the part of the government to help people like me get an education. And I felt obligated to repay that gesture; for one thing, so that the government could continue to offer these loans to future students.

Excellent point. I'm all for utilizing the myriad of ways available to help students attend college, but I wish more students had your ethics. Good on ya!

 

[busybusybusy]

wow, it looks like this thread is full of republicans.

🙂

Hahaha, big fat liberal right here! I'm just a huge supporter of taking responsibility for your actions...and that includes paying back student loans/not biting off more than you can chew.

 

[O Gurl]

wow, it looks like this thread is full of republicans.

🙂

As a raging liberal , it is slightly annoying to hear people equate fiscal responsibility to republicans only. If I recall correctly, the administration that lead the way into our currenct economic clusterf**k was that of one George Dubya Bush. We were actually in good financial shape at the close of our last liberal president's term. 😉

Ok, back from politico island...

 

[psychapps]

wow, it looks like this thread is full of republicans.

🙂

Along with Democrats raised amid blue-collar Republicans. I'm like a windshield wiper toggling back and forth between social justice and fiscal responsibility. Although according to my family, I'm a socialist, plain and simple. 😉

 

[DrGero]

I don't think anyone is going to get anywhere arguing that using IBR / PSLF to pay off your loans is "screwing the taxpayer." From my perspective, the rich and bankers have been screwing Main Street for orders of magnitude larger hunks of cash than the drops in the bucket this represents (bailouts, anyone?).

Anyways, political perspective-taking aside, you're not going to convince people to forgo IBR programs or professional school debt by appealing to their sense of responsibility to the taxpayer. Don't be silly. Self-interested reasons are much more compelling - like, a doctoral degree from Alliant or Argosy is probably not much better regarded than an MFT from a mediocre program. Or there's no guarantee that IBR will be around 10 years from now (which is true). No one cares about "the taxpayer," I hate to make it sound so crass, but it's true. Save your breath.

 

[Zigman]

I don't think anyone is going to get anywhere arguing that using IBR / PSLF to pay off your loans is "screwing the taxpayer." From my perspective, the rich and bankers have been screwing Main Street for orders of magnitude larger hunks of cash than the drops in the bucket this represents (bailouts, anyone?).QUOTE]

Agreed.

I also agree that planning to take out huge sums of money without the intention of paying it back is troubling. But, just to play devil's advocate here.....the only way one is going to get the 10-year IBR loan cancellation deal is by working in public service, for what will likely be a relatively modest salary. Is this controversial? Moreover, should school teachers, who do largely do the same, be on the hook for all of their student loan debt? How about when one enters into a job/loan forgiveness program with the National Health Service Corps, which requires a certain number of years providing services in underserved areas? Should those individuals be included in this diatribe as well? Is seems it might follow....

Now, I am aware that the OP has not really made any statements about desiring public service work. But is this not what is actually implied?

 

[cara susanna]

My one political contribution to this thread: Congress controls spending, not the president!

Okay, continue. 🙂

Anyway, I agree that this is a terrible idea. Philosophy aside, you don't know where the market and federal programs are going to be by the time you graduate.

 

[DrGero]

My one political contribution to this thread: Congress controls spending, not the president!

Yeah, but the President has a huge impact on the budgetary priorities set by Congress. He proposes a budget. He wields the veto pen. He controls huge numbers of federal bureaus. He can do executive orders. He has a lot of power of the purse of his own (more than he should, probably, Constitutionally).

Okay, continue. 🙂

Anyway, I agree that this is a terrible idea. Philosophy aside, you don't know where the market and federal programs are going to be by the time you graduate.

This is true, although my personal take is that absent a cataclysmic financial event (e.g., complete collapse of the US bond market - which could happen), financial aid to public service employees for their expensive educations would not be the first on the chopping block.

PSLF was actually designed for political appointees with expensive law degrees - who populate Washington in no small degree. If PSLF was scaled back significantly, it would hit congressional and senatorial staffers hard - and they are the closest to congress of anyone. This is my wife's take on things, anyways (and she's a smart cookie).

 

[AgapeBlue]

Now, I am aware that the OP has not really made any statements about desiring public service work. But is this not what is actually implied?

Sure, it's implied, but the OP says initially,

"After discussing IBR (which applies to the work environment of most psychologists)"

I am not going to assume the OP is aware of what does or does not constitute public service or the nuances of this program.

I really don't take much of what this person says as legit. His/her first post ever is on a the hot topic du jour, and there are initial statements made that make them sound pretty gullible/naive...etc.

...VERY nice office in a very nice part of the city.

Yeah, Madoff had a plush office in a sweet part of town. Give me a break. You want me to believe the OP is that blinded by a veneer of success?

 

[DrGero]

I suppose it's all a matter of you look at it (libertarian here). As I see it, there was a democratic congress in 2006. Most charts I think show a huge uptick in spending starting in about 2006. Further, the economic clusterF@#$ seeds were sowed far longer ago than the Bush administration. Carter passed a housing act and the bubble was created with an amplification of that act and policies in the clinton administration with greenspan. Certainly, Bush didn't avoid that, though he did call for reform of these policies related to lehman brothers/fannie may a full year+ before the collapse to which was argued by Reid, Pelosi et al that everything was fine and this was an attempt by republicans to attack the poor (policies our community activist president argued to support before he was president). Bush also argued, in his campaign, to privitize SS; you know get it out of the general budget and convert from being a pyramid scam to what it was intended to be at the outset. This was portrayed as an attack on SS by Gore, who wanted to keep SS in a "lockbox." An interesting turn of phrase given the intention to maintain the status quo of stealing the SS funds every year for the general budget. In short, the democrats are full of ****.

Republicans are full of ***t as well. Obama's "fiscally responsible" budget gets us at at 68 percent debt-to-GDP ratio by 2022 (2022??!!??). Paul Ryan's budget by the same time window? 70 percent.

Rand Paul's budget proposal, however, balances the budget in 5 years.

 

[cara susanna]

Jon Snow said it better than I ever could.

Well, even if you think the program will still be around, it still seems pretty risky to me. I've been reading a lot of law student blogs (I believe you linked that article about it, Dr. Gero) about Sallie Mae and the reality of owing thousands in student loans. I don't really see the advantage of taking on that debt especially when you could get the same education--or arguably, better--in a fully funded program.

Edit: Whoops, I confused Fannie and Sallie Mae. 😀

 

[AgapeBlue]

I KNEW this thread would make a decent political discussion!
😉

 

[Zigman]

. . . bailouts caused by people taking at loans that they couldn't pay back. If the population at large paid back their loans, a bailout would not have been necessary, there would have been no global economic crash. What policies lead to loaning money to large numbers of people that couldn't pay it back? Did that have something to do with government intervention? Yes sir.

You're right, it was those damn poor people! They're always screwing it up for the rest of us. It had nothing to do with bundling those bad loans, overrating their value/security, and then gambling on top of gambling as to their outcome -and making literally billions off of that uber-intricate casino (derivatives) system on Wall Street. Nope, nothing to do with that. It was all the poor people who were just so irresponsible to take out those loans.

 

[O Gurl]

In short, the democrats are full of ****.

I operate from the point of view that all politicians fall short, only some do so with marginally decent intent and others not so much. Bush's push to privatize SS into an unstable and unregulated stock market would have proved disasterous given that the whole darn thing collapsed on his way out. Beyond this, republicans are more than happy to pour truckloads of money into ill-conceived wars, because, you know, that sort of wasteful spending (with a side of massive loss of life) is just fine. More than that (because I can forgive a bad decision or two) let us not forget the sheer "sore loser" stance of the modern day GOP. I understand fighting back on big issues, but taking every little opportunity to derail every little move this president makes lead me to lose the last shred of respect I had for them. We elect people to work together for our common good, not to take symbolic social stances (e.g. take down planned parenthood) or work toward causing the failure of OUR president. Whether you voted for him or not, he is yours until his term is up. But now I have seriously digressed right along with you. I think the point of this thread has been served. We've all told the OP he/she is full of ___. I'm good with that. If I wanted to have heated political debates, I'd still frequent politico.com.

 

[DrGero]

. . . bailouts caused by people taking at loans that they couldn't pay back. If the population at large paid back their loans, a bailout would not have been necessary, there would have been no global economic crash. What policies lead to loaning money to large numbers of people that couldn't pay it back? Did that have something to do with government intervention? Yes sir.

Fed rates at an interminable 1% under Greenspan had something to do with all of that irresponsible lending (money becoming impossibly cheap). Also moral hazard from the previous S&L bailouts of the 80s probably had something to do with it as well - banks had the attitude of, so what if we're taking untenable risk by extending no-doc NINJA loans to carrot pickers so they can buy a monster home in Stockton? We can just repackage the loans into CDOs and sell them off to investors iterminably, and the happy dance will go on and if it doesn't, at least we'll never be left holding the bag because Uncle Sam always has got our back.

Now, the Government Motors bailout, that's a different story.

Meh, I think it's all the same story. The bank bailouts were ridiculously immoral. We could say that the bailouts prevented a larger collapse, but I consider that argument the metaphorical equivalent of the alcoholic getting a double martini the morning after a six-day bender so the DTs can be prevented. Sure, the DTs are prevented but that's not helping to prevent the alcoholics' liver from failing or from his booze stash eventually running out.

 

[cara susanna]

You're right, it was those damn poor people! They're always screwing it up for the rest of us. It had nothing to do with bundling those bad loans, overrating their value/security, and then gambling on top of gambling as to their outcome -and making literally billions off of that uber-intricate casino (derivatives) system on Wall Street. Nope, nothing to do with that. It was all the poor people who were just so irresponsible to take out those loans.

The government often forced the banks to issue those loans. Freddie Mac/Fannie Mae got rich buying them from the banks. It wasn't the poor people, they didn't really know what they were getting into.

Darnit, I told myself I was done arguing politics on the intarwebs. D:

 

[DrGero]

You're right, it was those damn poor people! They're always screwing it up for the rest of us. It had nothing to do with bundling those bad loans, overrating their value/security, and then gambling on top of gambling as to their outcome -and making literally billions off of that uber-intricate casino (derivatives) system on Wall Street. Nope, nothing to do with that. It was all the poor people who were just so irresponsible to take out those loans.

I almost applaud someone who makes eight dollars an hour who found a way to get themselves into a cushy home for a few years via a bank loan. Nice one! And in a perfect world, it would be the bank's responsibility to eat it when such an obviously bad loan went bad (and the minimum-wage earner's credit gets ruined, but what do they care? In a sane market they should never get a loan anyways)

Noooo, we had to make the banks "whole." Bulls**t.

 

[cara susanna]

You don't have to argue with me on that one, I was against all of the bail-outs.

 

[Therapist4Chnge]

I <3 this thread.

Student Loan Default will be the 4th Bubble, with the prior three being Tech, Housing, and Financial. We are damned as a society until we make significant changes in how we govern what we govern as a country. It all went down hill when the Federal Govt's power/unfluence usurped State Gov'ts, and the Supreme Court became an extension of ideology instead of a true checks and balance of the system.

For those of you who enjoy talking politics, I'd recommend checking out the Socio-Political Forum, it is now a sub-section of The Lounge. It is quite entertaining, though it is not for the faint of heart. 😀