RE: Forgive Student Loans? (Full Version)

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samboct -> RE: Forgive Student Loans? (10/20/2011 5:55:26 AM)

Semi

Here's a chart showing the explosive growth of this debt. This to me is due to a Republican idea that rather than grants, students should pay for their own education- along with guarantees to the banks that underwrote these loans that the federal gov't would ensure that the loans get paid off- hence the 2005 decision altering bankruptcy.

http://www.theatlantic.com/business/archive/2011/08/chart-of-the-day-student-loans-have-grown-511-since-1999/243821/

and here's a link that shows in some mind numbing detail, just exactly who's taken out the loans and how big they are...

http://www.finaid.org/loans/


And here's the article which showed that the Dept of Ed. took over these loans from banks in 2010- turns out that the Dems slipped this one into the Obama care bill.

http://articles.sfgate.com/2010-03-30/business/20827156_1_college-loans-stafford-loans-rate-on-plus-loans

This is an issue that deserves more attention than its been getting. It's a disaster for our country- we've got kids graduating college in debt up to their eyeballs- they're not going to be able to afford to buy things like cars, homes etc. for a long time and the only industry that makes out from this is the financial industry. I suspect though that schools have been jacking up tuition unconscionably- this is smelling like what happened in health care when for-profit hospitals showed up. The net result seems to have driven up the cost terrifically as non-profits begin to match what for-profits charge- and that's probably happened in education as well.

All of this strikes me as idealogy gone wild- the Republicans say that the Federal gov't should let the private sector take over, and now we've got a rentiers economy where students are in thrall to the banks for decades, and hospital costs have spiraled out of control. Can we please point out that occasionally the gov't does a good job of holding down costs in areas where the profit motive shouldn't exist- such as education, health care, and prisons- and that when we allow "free market" capitalism into these industries, we have the current disaster.

To me there are four main issues going on here:

1) Historically, the US succeeded economically when it guaranteed a higher level of education to its citizens than other countries. This was done through high school prior to WWII where US graduation rates were higher than nearly every other country, with the exception of Germany IIRC. However, this was not done through student loans- it was done through scholarships.
2) We need to find more jobs for our graduates.
3) The amount of money being paid in interest (even at the federal level) is strangling our economy- this money needs to be spent on other products.
4) Perhaps the idea that everyone should go to college is flawed. I'm not sure about this one by the way- but it does seem like if there was an additional 1T worth of demand, and we began manufacturing stuff back in this country to protect our intellectual property, we'd create a virtuous cycle that would help graduates find jobs.

Sam



kalikshama -> RE: Forgive Student Loans? (10/20/2011 6:41:36 AM)

[image]http://cdn.theatlantic.com/static/mt/assets/business/crazy%20student%20loans%202011-q2.png[/image]



Iamsemisweet -> RE: Forgive Student Loans? (10/20/2011 7:49:43 AM)

Great post Samboct.
. Seems we are in agreement that people need to take a much harder look at the cost/ benefit of higher education. I also am strutting with this, since I have long bought into the idea of education leading to a better life. I also agree that out of control tuition is part of the problem, and that won't change until the states find ways to increase funding. I also think that private so called trade schools need to be penalized for being little more that financial aid mills, in many cases.



FirmhandKY -> RE: Forgive Student Loans? (10/20/2011 7:54:59 AM)

quote:

ORIGINAL: Iamsemisweet

Great post Samboct.
. Seems we are in agreement that people need to take a much harder look at the cost/ benefit of higher education. I also am strutting with this, since I have long bought into the idea of education leading to a better life. I also agree that out of control tuition is part of the problem, and that won't change until the states find ways to increase funding. I also think that private so called trade schools need to be penalized for being little more that financial aid mills, in many cases.

I basically agree with this, except I take exception to the belief that it is a "funding" problem with schools.

The cost of tuition has risen all out of proportion to inflation.  Schools need to look at what they are doing that is not education and to be more constrained on what they spend.

It's not the lack of money spent on education that is causing the majority of the problem.  It's the lack of strong fiscal constraints on the budgets of many of the schools that is the problem.

Firm



DomYngBlk -> RE: Forgive Student Loans? (10/20/2011 7:59:37 AM)

quote:

ORIGINAL: samboct

Semi

Here's a chart showing the explosive growth of this debt. This to me is due to a Republican idea that rather than grants, students should pay for their own education- along with guarantees to the banks that underwrote these loans that the federal gov't would ensure that the loans get paid off- hence the 2005 decision altering bankruptcy.

http://www.theatlantic.com/business/archive/2011/08/chart-of-the-day-student-loans-have-grown-511-since-1999/243821/

and here's a link that shows in some mind numbing detail, just exactly who's taken out the loans and how big they are...

http://www.finaid.org/loans/


And here's the article which showed that the Dept of Ed. took over these loans from banks in 2010- turns out that the Dems slipped this one into the Obama care bill.

http://articles.sfgate.com/2010-03-30/business/20827156_1_college-loans-stafford-loans-rate-on-plus-loans

This is an issue that deserves more attention than its been getting. It's a disaster for our country- we've got kids graduating college in debt up to their eyeballs- they're not going to be able to afford to buy things like cars, homes etc. for a long time and the only industry that makes out from this is the financial industry. I suspect though that schools have been jacking up tuition unconscionably- this is smelling like what happened in health care when for-profit hospitals showed up. The net result seems to have driven up the cost terrifically as non-profits begin to match what for-profits charge- and that's probably happened in education as well.

All of this strikes me as idealogy gone wild- the Republicans say that the Federal gov't should let the private sector take over, and now we've got a rentiers economy where students are in thrall to the banks for decades, and hospital costs have spiraled out of control. Can we please point out that occasionally the gov't does a good job of holding down costs in areas where the profit motive shouldn't exist- such as education, health care, and prisons- and that when we allow "free market" capitalism into these industries, we have the current disaster.

To me there are four main issues going on here:

1) Historically, the US succeeded economically when it guaranteed a higher level of education to its citizens than other countries. This was done through high school prior to WWII where US graduation rates were higher than nearly every other country, with the exception of Germany IIRC. However, this was not done through student loans- it was done through scholarships.
2) We need to find more jobs for our graduates.
3) The amount of money being paid in interest (even at the federal level) is strangling our economy- this money needs to be spent on other products.
4) Perhaps the idea that everyone should go to college is flawed. I'm not sure about this one by the way- but it does seem like if there was an additional 1T worth of demand, and we began manufacturing stuff back in this country to protect our intellectual property, we'd create a virtuous cycle that would help graduates find jobs.

Sam



Agree with most of what you said sam but the problem is current. It isn't one that you can sit around and wait 5 years hoping the economy will improve, wage growth will rebound, and debts will be eased. Something needs to be done quickly and now. It is a growing cancer and unless we do the surgery needed it will retard growth and opportunity for years to come.

What would you do right now to fix this problem? Or would you rather wait.



Iamsemisweet -> RE: Forgive Student Loans? (10/20/2011 8:05:55 AM)

Tuition at my state universities has risen 14-17% each year for the last 4 years. Funding from the state has been cut 50% in the last three years. Coincidence? I think not. UW raised tuition because they had to make up for their loss in funding somehow. In addition they began actively recruiting more out of state students who pay higher tuition. It most certainly is a funding problem, and I would rather see it be dealt with by improving funding at the schools than forgiving student loan
UW is the situation I am most familiar with, but I imagine this is true at other universities also. In addition, UW funded their endowment with lots of real estate investments that took a huge hit when the Seattle market crashed. I just don't see all this wasteful spending you are talking about, I see funds drying up.
quote:

ORIGINAL: FirmhandKY

quote:

ORIGINAL: Iamsemisweet

Great post Samboct.
. Seems we are in agreement that people need to take a much harder look at the cost/ benefit of higher education. I also am strutting with this, since I have long bought into the idea of education leading to a better life. I also agree that out of control tuition is part of the problem, and that won't change until the states find ways to increase funding. I also think that private so called trade schools need to be penalized for being little more that financial aid mills, in many cases.

I basically agree with this, except I take exception to the belief that it is a "funding" problem with schools.

The cost of tuition has risen all out of proportion to inflation.  Schools need to look at what they are doing that is not education and to be more constrained on what they spend.

It's not the lack of money spent on education that is causing the majority of the problem.  It's the lack of strong fiscal constraints on the budgets of many of the schools that is the problem.

Firm




DomYngBlk -> RE: Forgive Student Loans? (10/20/2011 8:12:13 AM)

Semi, I think you are talking about two problems. Built up student loans and high cost of education. Are you saying fuck you to all the people that have student loan debt? That that group basically is fucked for life?

I agree that education costs need to be brought in line.



DomYngBlk -> RE: Forgive Student Loans? (10/20/2011 8:18:16 AM)

quote:

ORIGINAL: FirmhandKY

quote:

ORIGINAL: Iamsemisweet

Great post Samboct.
. Seems we are in agreement that people need to take a much harder look at the cost/ benefit of higher education. I also am strutting with this, since I have long bought into the idea of education leading to a better life. I also agree that out of control tuition is part of the problem, and that won't change until the states find ways to increase funding. I also think that private so called trade schools need to be penalized for being little more that financial aid mills, in many cases.

I basically agree with this, except I take exception to the belief that it is a "funding" problem with schools.

The cost of tuition has risen all out of proportion to inflation.  Schools need to look at what they are doing that is not education and to be more constrained on what they spend.

It's not the lack of money spent on education that is causing the majority of the problem.  It's the lack of strong fiscal constraints on the budgets of many of the schools that is the problem.

Firm



Firm, do you get how old and worn out that position is on everything? Just cut it back or cut off the funding and all will be fine. Really? Your simple implication is that anyone that is running anything are complete idiots and spend money like water without ever having to worry about a budget. Is that really it? Isn't there likely some other solution that would help everyone rather than trying to punish people?

I have often asked the cutters here...whether it is funding or taxes ...why not cut out all taxes..down to zero. Wouldn't that make the most sense to you? It is really the end game of what you are always asking for. Make Gov't volunatary. Sweep it away. You obviously don't like it and feel those people are only out to harm you.



Iamsemisweet -> RE: Forgive Student Loans? (10/20/2011 8:22:08 AM)

I agree, it is two problems. But I also know that if debt is just forgiven, either the Feds will have to pay off on the guarantees or somehow compensate the banks for their private loans. Do you really believe the Feds can just pass a law saying borrowers don't have to pay, without having to compensate the lenders, either for contractual or constitutional reasons?
So where does the money come from?
I recognize that this is a current problem. It is a problem for me! But given a choice, I would rather fix the underlying problem (underfunded schools who can't provide an affordable education, therefore forcing their students to borrow exorbitant amounts of money), then provide even more bailout money that ultimately benefits the banks. Adequately funding schools so they are within reach of middle class families is going to be the better, long term solution.



DomYngBlk -> RE: Forgive Student Loans? (10/20/2011 8:35:16 AM)

As was mentioned before most of the loans are gov't run. If we can spend that kind of cash on banks. We can on people. Conversely, no, you give the banks 25 cents on the dollar for their loans which they shouldn't have gotten into in the first place. The banks and their shareholders have felt no pain through this whole process. They need to feel some.

Again we agree on funding solutions for schools.



defiantbadgirl -> RE: Forgive Student Loans? (10/20/2011 8:36:48 AM)

Americans have to take a harder look at the cost/benefit of higher education while citizens of some other countries receive their higher education free. Unlike Americans, they have FREEDOM from student loan debt and FREEDOM to buy homes and vehicles without being turned down due to debt to income ratio. Yet we are more free than they are? Bullshit. Also, how do Americans compete with immigrants in the job market if they attend college and we don't?



samboct -> RE: Forgive Student Loans? (10/20/2011 8:41:11 AM)

Hi Semi, Firm

I think both you and Firm are correct. He's right in that the cost of tuition has been rising very rapidly- I think some schools have been raising tuition because that's what other schools have done- essentially price fixing. The problem is compounded by the fact that some schools with lousy endowments need to raise tuition- whereas other schools with huge endowments- all of the Ivy League essentially, don't.

I see the problem that the availability of private student loans, marketed to gullible students and parents who took at as a given that the cost of education would always be made up with higher wages as a big part of the problem. If you look at the size of the federal loans to students- they haven't changed much in 15 years- I think it's around $6k per year. The shortfall has been made up with the private bank loans- assuming that the federal loans were in OK shape. But like a lot of loans, it wasn't easy to comparison shop, and rates could get really jacked up- just like credit cards. Without easy loans, schools would have been forced to look much harder at ways to curb tuition increases. So I think Firm is correct here. Last time I checked, sports programs are notorious for actually costing far more than they actually bring in- I grit my teeth when I hear about coaches getting paid millions while science labs are in shambles. In my state, there's been a $100M plus scandal involving dorms at UConn that were built below code and yet the contractors got away with it- and then charged a fortune to bring them up to code. Things like fire alarms were left out- it was a pretty sick joke and a very expensive one for the CT taxpayer.

However, I do know that schools only have so many options when other funding gets cut so it may be that some schools have little alternatives. With cutbacks in federal money, states have been having terrible budget pressures. Cali's got the one where they spend more money on prisons than on education- that aggravates me. Why the hell should prison guards make more money than teachers?

But the truth is I don't know about where to focus efforts-I only know that there's a big problem here and that loan forgiveness is going to have to be part of the solution- we can't saddle the upcoming generation with this pile of debt- it's just a disaster at so many levels. One way to deal with the moral issue is to go to principal only loans- these folks said they'd borrow money for school and it'll get paid back, just not with interest. This is halfway between complete forgiveness and not doing anything. Since most of the loans are now held by the federal gov't- we don't have the banks whining about losing money.

If we think about federal scholarship money at a lousy $25B for the country- that needs to change and in a hurry- most loans need to be converted to scholarships. It's going to have to be need based as well-but the problem is that the middle class has typically gotten terribly squeezed here. Let's face it, if you've got a pair of kids in college at the same time and you're paying for it- you're making more than $200K- that's not a big part of the populace.

We've been making some very bad choices for the past decades, and it seems they're coming home to roost in some unexpected ways.


Sam



Iamsemisweet -> RE: Forgive Student Loans? (10/20/2011 8:49:03 AM)

There are two basic kinds of federal loans. One is direct, the other is guaranteed. I suppose the Feds could forgive the direct loans, if they elected to do so, although i don't necessarily agree that this is a good idea. Erasing those loans from the balance sheet would make the things even worse. These loans are not the majority though. On the guaranteed loans, the Feds have a contract with the bank to pay interest during the deferral period AND guarantee repayment. If you are saying the Feds should just ignore that contract, well, that is an interesting idea. Wonder what the Supremes would do with that case, that the banks would undoubtedly bring. I would support some sort of enhanced deferrals or more opportunities to exchange public service for partial debt forgiveness.
This whole discussion is making me realize how right my ex and I were when we decided our kids would not be taking out any loans.



tazzygirl -> RE: Forgive Student Loans? (10/20/2011 8:50:38 AM)

~FR

Easiest way to control enrollment is by pricing.



DomYngBlk -> RE: Forgive Student Loans? (10/20/2011 8:57:15 AM)

quote:

ORIGINAL: Iamsemisweet

There are two basic kinds of federal loans. One is direct, the other is guaranteed. I suppose the Feds could forgive the direct loans, if they elected to do so, although i don't necessarily agree that this is a good idea. Erasing those loans from the balance sheet would make the things even worse. These loans are not the majority though. On the guaranteed loans, the Feds have a contract with the bank to pay interest during the deferral period AND guarantee repayment. If you are saying the Feds should just ignore that contract, well, that is an interesting idea. Wonder what the Supremes would do with that case, that the banks would undoubtedly bring. I would support some sort of enhanced deferrals or more opportunities to exchange public service for partial debt forgiveness.
This whole discussion is making me realize how right my ex and I were when we decided our kids would not be taking out any loans.


In this climate I'd think that the banks wouldn't have the balls to try that. But, if they did someone from the Executive Branch might want to advise them that the AG might have a look at the situation from a few years ago. In other words fuck the banks. As I said, they and their shareholders have felt no pain out of this and they should.



defiantbadgirl -> RE: Forgive Student Loans? (10/20/2011 9:02:10 AM)

quote:

ORIGINAL: samboct

If you look at the size of the federal loans to students- they haven't changed much in 15 years- I think it's around $6k per year.


If federal student loans 15 years ago were only $6,000 they've definitely changed. I only have Stafford loans and they're quite a bit more than that per year for a full time student.



samboct -> RE: Forgive Student Loans? (10/20/2011 9:57:58 AM)

Hi Semi

Maybe I'm not understanding something- but it looks to me like the Fed has taken over the loans that had been handed to the banks. The banks may have originated the loans, but the Dept of Ed is now responsible. See: http://www.estudentloan.com/student-loans/federal-stafford-loan.html

Since it's not the banks capital- I don't see how much squawking they can really do. Furthermore, given the high rate of defaults, its clear that the banks haven't been responsible lenders, so again, I'm not so sure that their contracts would really hold water.

DBG- there's a spreadsheet that I downloaded that I can't find the link to again called debtatgraduation which breaks down student debt, parent debt etc. It looks like the average student educational debt at graduation is $37k with about $24k of that being student debt or about $6k per year with the remainder being parental debt. There are big differences between the mean and the average though, which means that there are some people with six figure debt in the average as well.

Sam



FirmhandKY -> RE: Forgive Student Loans? (10/20/2011 10:04:19 AM)

quote:

ORIGINAL: Iamsemisweet

Tuition at my state universities has risen 14-17% each year for the last 4 years. Funding from the state has been cut 50% in the last three years. Coincidence? I think not. UW raised tuition because they had to make up for their loss in funding somehow. In addition they began actively recruiting more out of state students who pay higher tuition. It most certainly is a funding problem, and I would rather see it be dealt with by improving funding at the schools than forgiving student loan
UW is the situation I am most familiar with, but I imagine this is true at other universities also. In addition, UW funded their endowment with lots of real estate investments that took a huge hit when the Seattle market crashed. I just don't see all this wasteful spending you are talking about, I see funds drying up.
quote:

ORIGINAL: FirmhandKY

quote:

ORIGINAL: Iamsemisweet

Great post Samboct.
. Seems we are in agreement that people need to take a much harder look at the cost/ benefit of higher education. I also am strutting with this, since I have long bought into the idea of education leading to a better life. I also agree that out of control tuition is part of the problem, and that won't change until the states find ways to increase funding. I also think that private so called trade schools need to be penalized for being little more that financial aid mills, in many cases.

I basically agree with this, except I take exception to the belief that it is a "funding" problem with schools.

The cost of tuition has risen all out of proportion to inflation.  Schools need to look at what they are doing that is not education and to be more constrained on what they spend.

It's not the lack of money spent on education that is causing the majority of the problem.  It's the lack of strong fiscal constraints on the budgets of many of the schools that is the problem.

Bown's Rule:

"All universities, and in particular major institutions with or seeking elite status, will use any and all funds they receive for the pursuit of perceived excellence and improvement.”

Financial Aid in Theory and Practice

While spending money in the pursuit of excellence by universities sounds great—who doesn’t like excellence— there is the downside that whatever they spend has to come from somewhere. Indeed, the expenditure of additional resources is the same thing as raising the cost per student. Thus, if the financial aid system allows for schools to acquire additional resources, it will have the effect of raising costs per student. In other words, viewing the problem as how to distribute financial aid, given the costs of providing an education is inappropriate when costs are partly determined by the financial aid system.

Is there reason to suspect that the current financial aid system will lead to higher costs? Yes.

Interesting read.  In effect, there are few market limits to what the "higher education" system will spend, given the opportunity, and little in the way of concrete measurement yardsticks.

The more money you feed it, the more money it can justify and seek, but the study specifically shows that the way we fund it causes a rise in tuition costs.

Firm



Iamsemisweet -> RE: Forgive Student Loans? (10/20/2011 10:24:42 AM)

I will take a look at this a little later, thanks for posting it.  Gotta get a little work done, so I can keep making my student loan payment.  LOL
quote:

ORIGINAL: samboct

Hi Semi

Maybe I'm not understanding something- but it looks to me like the Fed has taken over the loans that had been handed to the banks. The banks may have originated the loans, but the Dept of Ed is now responsible. See: http://www.estudentloan.com/student-loans/federal-stafford-loan.html

Since it's not the banks capital- I don't see how much squawking they can really do. Furthermore, given the high rate of defaults, its clear that the banks haven't been responsible lenders, so again, I'm not so sure that their contracts would really hold water.

DBG- there's a spreadsheet that I downloaded that I can't find the link to again called debtatgraduation which breaks down student debt, parent debt etc. It looks like the average student educational debt at graduation is $37k with about $24k of that being student debt or about $6k per year with the remainder being parental debt. There are big differences between the mean and the average though, which means that there are some people with six figure debt in the average as well.

Sam



AdorkableAiley -> RE: Forgive Student Loans? (10/20/2011 10:34:20 AM)

quote:

ORIGINAL: Iamsemisweet

Have you thought about the Peacecorps, or Americorps, Alley? I think you can get some debt forgiveness from that.


I have looked into these things and for personal reasons they would not work out, I wish they would though...


Ailey



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