Student Loan Debt

[syrenn]

NPR had a segment this morning on student loan debt. They interviewed several young adults about the impact that this mountain of debt will have on their futures. It is truly overwhelming when you consider all the ramifications of, say $50 thousand in debt at age 22 - all of which must be repaid with after-tax dollars.

Delayed marriage and children,
Delayed emancipation from parents,
Delayed home ownership or purchase of marginal housing,
Delayed start of savings for retirement,
Inability to make normal middle-class investments likes stocks, real estate.

A couple of the ones interviewed pointed out that at the time they were deciding to take on this debt they did not have the maturity or experience with money to comprehend what the debt would mean to their future lives.

It is not unusual to hear young people talking about having a "significant other" who is so loaded with student loan debt that they just can't see marrying the person and assuming responsibility for that debt - or even a portion of it.

And to remind those who may not be aware, you cannot have student loan debt discharged in bankruptcy, so the most common means of getting out from under massive debt is closed to you.

Much of the problem just comes back to college tuition being totally out of control. The colleges know that there are federal and state grants and loans, and private loans available, and they also know that if they make a good impression on the kids they will choose to go there, even if it is an insane choice financially.

When I started college I was on my own (as a 21 year old veteran), and to me it made no sense to do anything other than start out in the local community college. I knew I would get good grades there, and if I lined up my coursework with the University of Pittsburgh I could transfer all my credits. It worked out as planned. When I went to Pitt, I took 18 credits per semester (because the price was the same for 12 or more credits), and I worked full time, midnight shift, as a security guard. I got some VA money and a small grant from Pennsylvania, but I graduated with no debt. I went to law school at night (while working full time, of course), got my employer to pay a piece of it, and again graduated with no debt.

Even with everything that is being written about crushing student debt, I still see middle class kids heading off to God-awful expensive private colleges when the local state schools are just as good and half as much money. Not to pick on them, but I can't imagine why anyone would go to Duquesne University here in Pittsburgh, when Pitt is just as good and costs half as much. Because they like the feeling better? Are you kidding me?

In indulging these kids the parents are doing them a great disservice.

In my opinion, college tuition should be financed BY THE COLLEGES THEMSELVES. Then if the kids default on the loans, it's the ones at fault who suffer first.

The bottom line is they signed on the dotted line for the loan.

The ONLY person to blame for that loan is themselves. I have no sympathy.

 

[Dont Taz Me Bro]

Low education loan interest rates would be a great thing that could help, also I always wondered why they don't offer a sort of "pretax" loan repayment program. That would be very nice too.

But like I mentioned, these are just band aids to temporarily aid in the wound caused by the larger root problems.

When colleges know that there's not a huge barrier for charging $22k for tuition (because kids can get loans), you better believe they're going to charge $22k. Why wouldn't they? If students no longer had as free of access to loans, or could only get up to $7k per year - for instance - I'd guarantee you that colleges would be forced to lower costs. Very few individuals can reasonably afford to pay $15k out of pocket per year for school, and thus enrollment would drop dramatically.

The problem is that average dolt can't get this through their thick head. If anyone in the government proposed scaling back the amount of Stafford loans the screams of "hurting the poor" would start echoing through the halls of Congress. They're all so damn stupid.

 

[Dont Taz Me Bro]

The ONLY person to blame for that loan is themselves. I have no sympathy.

It's at the point that there is no other choice for most people and without a college degree it's much more difficult to get a decent paying job. People are getting trapped.

 

[MHunterB]

I think that some of the problem is unrealistic expectations by the new grads. My son (3.94 cum in Bio/Biochem) is working running a lab at the university he graduated from: he makes a bit over $15/hour equivalent. He is paying his health insurance ($201/month) and his student loans ($425/month) - and putting money away for retirement. Of course, he shares a house with 3 other people so his rent is less than his student loans.....

If new grads expect to have their own nice big place right after graduation - they are unrealistic. Unless perhaps if they graduated in engineering......

 

[percysunshine]

So easily do people forget the lessons of 2008 era Fannie and Freddie.

 

[aplcr0331]

I think that some of the problem is unrealistic expectations by the new grads. My son (3.94 cum in Bio/Biochem) is working running a lab at the university he graduated from: he makes a bit over $15/hour equivalent. He is paying his health insurance ($201/month) and his student loans ($425/month) - and putting money away for retirement. Of course, he shares a house with 3 other people so his rent is less than his student loans.....

If new grads expect to have their own nice big place right after graduation - they are unrealistic. Unless perhaps if they graduated in engineering......

He spent 4 years working his ass off for a difficult degree in science, utilizing student loans to pay for it and he makes "a little" over $15 an hour? That's barely $30K a year. And you negged rep'd me because I think College is kind of a scam for a lot of kids?

 

[boedicca]

Tuition has risen because the states stopped funding higher education. Fun filled fact.

B'loney. The cost of a college education has increased at multiples of the inflation rate. Most of that money went into expanded administration, buildings, and bullshit programs that completely irrelevant to getting a job. And why? Because the FEDS provided "free money".

 

[Disir]

Tuition has risen because the states stopped funding higher education. Fun filled fact.

B'loney. The cost of a college education has increased at multiples of the inflation rate. Most of that money went into expanded administration, buildings, and bullshit programs that completely irrelevant to getting a job. And why? Because the FEDS provided "free money".

http://www.usmessageboard.com/educa...he-slow-death-of-public-higher-education.html

 

[DGS49]

The basic point is that the decision to take on this mountain of debt is being taken by 19-year-olds who have no concept of how paying off that debt will affect their lives.

The parents are unwilling to say, "No." They want their kids to be happy and have a lovely college experience on a wonderful college campus. All completely understandable, but the great availability of those loans is a real problem. Government involvement has taken away any risk from the lenders, and permitted the colleges to increase their tuitions and fees at outrageous rates.

When my son was finished looking at colleges he said he wanted to go to Ohio State (we live in Pennsylvania). I told him, nofuckingway were we going to pay out-of-state tuition to go to an Ohio state school, when Pennsylvania had at least two schools at least as good as OSU. He found my argument convincing, took a close look at Pitt and Penn State, and ended up going to Pitt, with no regrets or second thoughts. We could have afforded OSU and it might have made my son happier, but it would have been stupid.

In contrast, his girlfriend at the time had a FULL RIDE offered to her at Penn State (Scholars Program), but wanted to go to John Carroll in Cleveland. Her dad took out a second mortgage to send her to John Carroll, to study FRENCH! He is a very bright guy but made this decision with his head up his ass.

As most parents seem to do.

 

[Bgallo28]

The bottom line is they signed on the dotted line for the loan.

The ONLY person to blame for that loan is themselves. I have no sympathy.

Students take a gamble hoping their degree will pay off just like loan companies take a gamble giving out loans to students.

 

[waltky]

Student loan borrowers in for a surprise...

Student Loan Borrowers Don't Know What They're In For: Fed Blog
June 06, 2014 — Student loans from the federal government are generally easy to get. With the exception of PLUS loans, which are co-signed by parents or guardians, credit scores are not checked, because most borrowers are assumed to be just out of high school. Employment histories aren't checked for the same reason.

So the New York Fed added some questions on the topic to its Survey of Consumer Expectations last July that were directed to heads of households as opposed to the students — referred to as "the child" — who got the loans. The result? The respondents, the report concluded didn't know what they were in for.

For example, 1,029 respondents were asked: If a borrower is unable to repay her federal student loan, what steps can the government take to collect the debt?

A. Report that the student debt is past due to the credit bureaus.
B. Garnish wages until the debt, plus any interest fees, is repaid.
C. Retain tax refunds and Social Security payments until the debt, plus any interest and fees, is repaid.
The answer? All of the above.

A June 5 post on the New York Fed's Liberty Street Economics blog stated that its authors found that less than a third of U.S. household heads – 28% - knew that the government could take all of these actions. Taken independently, 41% believed the U.S. government may report delinquent student debt to the credit bureaus, 41% believed the government may garnish wages and 51% believed the government may retain tax refunds and Social Security payments.

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[sameech]

Student loan borrowers in for a surprise...

Student Loan Borrowers Don't Know What They're In For: Fed Blog
June 06, 2014 — Student loans from the federal government are generally easy to get. With the exception of PLUS loans, which are co-signed by parents or guardians, credit scores are not checked, because most borrowers are assumed to be just out of high school. Employment histories aren't checked for the same reason.

So the New York Fed added some questions on the topic to its Survey of Consumer Expectations last July that were directed to heads of households as opposed to the students — referred to as "the child" — who got the loans. The result? The respondents, the report concluded didn't know what they were in for.

For example, 1,029 respondents were asked: If a borrower is unable to repay her federal student loan, what steps can the government take to collect the debt?

A. Report that the student debt is past due to the credit bureaus.
B. Garnish wages until the debt, plus any interest fees, is repaid.
C. Retain tax refunds and Social Security payments until the debt, plus any interest and fees, is repaid.
The answer? All of the above.

A June 5 post on the New York Fed's Liberty Street Economics blog stated that its authors found that less than a third of U.S. household heads – 28% - knew that the government could take all of these actions. Taken independently, 41% believed the U.S. government may report delinquent student debt to the credit bureaus, 41% believed the government may garnish wages and 51% believed the government may retain tax refunds and Social Security payments.

MORE

People who don't know the meaning of "loan" shouldn't be going to college

 

[hipeter924]

Isn't it grand how the Federal Government has enticed gullible students into taking on such crushing debt, and then rigged the rules so bankrupt people are still on the hook for it?

Yep, tertiary education is now purely running a business, rather than out to provide qualifications to help people find employment. So many universities keep increasing the cost of education and provide the same 'quality' of education as before, and state assistance for students just keeps being cut.

America has already hit the point that most companies have to hire from other countries, as the US education system has put up a brick wall for Americans wanting to get a qualification and get into a high-paying job, there is now a big shortage of qualified Americans.

 

[boedicca]

Isn't it grand how the Federal Government has enticed gullible students into taking on such crushing debt, and then rigged the rules so bankrupt people are still on the hook for it?

Yep, tertiary education is now purely running a business, rather than out to provide qualifications to help people find employment. So many universities keep increasing the cost of education and provide the same 'quality' of education as before, and state assistance for students just keeps being cut.

America has already hit the point that most companies have to hire from other countries, as the US education system has put up a brick wall for Americans wanting to get a qualification and get into a high-paying job, there is now a big shortage of qualified Americans.

I like Glenn Reynolds' idea that if students default on debt, the School is on the hook to repay the lender. We need Truth In Lending in higher education - with disclosure of the economic value of the education in the job market.

 

[waltky]

Obama gonna use executive order to fix it...

Obama's Student Loan Forgiveness Strategy: Sign and Chat
June 09, 2014 — The student loan crisis moves to the East Room of the White House, at least for a day as President Obama is expected to provide relief through an executive order, a sign that he thinks the student loan refinancing bill from Elizabeth Warren (D-Mass.) is dead on arrival in the Senate.

The order Obama signs will expand the Department of Education's Pay As You Earn program, which limits student loan payments and forgives unpaid debt after 20 years. White House spokesperson Matt Lehrich estimates that an additional five million borrowers could qualify for lower payments under this plan. Obama is expected to discuss the details and takes questions in a Tumblr chat on Tuesday. Obama himself campaigned on the promise to reduce the student debt burden — a promise critics say he hasn't made good on.

But any relief that can be provided by an executive order is a long way off. The Department of Education will have to write new rules and regs to implement it, something that isn't expected to happened until the end of 2015. Student debt is at an all-time high, but borrowers, for whatever reason, are staying away from income-based repayment plans — only 11% have enrolled.

The President also wants the Department of Education to renegotiate contracts with federal student loan servicers and provide them with financial incentives to keep students out of default. The percentage of students who defaulted within two years of graduation are at a nearly two-decade high at 10%.

In March, the four big servicers,--SallieMae, Great Lakes, NelNet and the Pennsylvania Higher Education Assistance Agency — failed to attend a Senate hearing which, among other things, concerned the renewals of their contracts. Current contracts for all four expire on July 1.

MORE

 

[JakeStarkey]

Isn't it grand how the Federal Government has enticed gullible students into taking on such crushing debt, and then rigged the rules so bankrupt people are still on the hook for it?

The banks rigged the rules, and the govt went along with it.

Congress immediately should refinance all loans at 4% per annum and forgive all prior penalties and fees.

 

[boedicca]

So much for the Federal Government following its own Truth In Lending regulations....

 

[sameech]

Isn't it grand how the Federal Government has enticed gullible students into taking on such crushing debt, and then rigged the rules so bankrupt people are still on the hook for it?

The banks rigged the rules, and the govt went along with it.

Congress immediately should refinance all loans at 4% per annum and forgive all prior penalties and fees.

I think there were people who were able to lock in below 4% depending on when they consolidated under which recession. Seems to me that someone told me on some forum a few years ago that they locked in the 3's and then got a discount for electronic payments that dropped them into the upper 2's

 

[whitehall]

It's a contract isn't it? Even a flunking freshman law student should be aware that a presidential decree doesn't nullify contract law.

 

[waltky]

Yea, let Granny pay for it - she gots the money...

Student Loan Debt Solution: Should Grandparents Pay for College?
June 10, 2014 — With rising costs to obtain a college degree, many grandparents are stepping in and helping to finance higher education.

A new study conducted by Fidelity shows that 53% of grandparents are saving or plan to start saving to help pay for college costs and 90% report they would be likely to make a contribution to their grandchild's college savings fund for special occasions in place of other gifts if they were asked. More than half, or 52%, of grandparents are familiar with 529 college savings plans, with 37% who say they worry about their grandchild's ability to attend college without incurring significant student loan debt.

Grandparents understand the increasing costs of college and many expect to make significant contributions. When asked how much they anticipate contributing to college education funds of all their grandchildren, they report a median of $25,000, with 35% expecting to contribute $50,000 or more. "Contributions from grandparents – big or small – can add up over time and potentially open up a grandchild's opportunities when making college decisions," said Keith Bernhardt, vice president of college planning at Fidelity, the Boston financial institution. "Ongoing communication between parents and grandparents can help when determining how to grow their savings, as well as how to best leverage those savings to pay for college when the time comes."

The study found that grandparents are drawn to 529s, because they are dedicated solely to college savings and those earnings can be withdrawn tax-free for education expenses. Many of them are also a fan of having the funds can be controlled until the time is right to share them with their children, grandchildren or college of choice.

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