Author Topic: The worst one of these ever  (Read 14889 times)

KittyFooFoo

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The worst one of these ever
« on: November 30, 2015, 08:51:41 PM »
I have felt for a while now that crippling student debt cases (we have our own moderately crippling one) are primarily a problem of naive, awful decisions.  And this article acknowledges that pretty freely, at least in her case.

But yeah, issuing infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when lending monstrous piles of money, is kinda evil.

http://www.nytimes.com/2015/11/29/upshot/student-debt-in-america-lend-with-a-smile-collect-with-a-fist.html?_r=0

Samala

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Re: The worst one of these ever
« Reply #1 on: November 30, 2015, 09:19:22 PM »
I was just reading this and looking around for a thread..

I'm stunned that she could have avoided making even one payment for TWENTY FIVE YEARS.  I thought I was really well versed in the student loan system and all of its programs and borrower "benefits" and I had no idea you could get deferments, forebearance, and claim hardships that could possibly extend that long.  This seems like outright abuse of the system to me.

It really disturbs me that the final sentence has quoted her as saying "there ought to be a way out."  I could type a million things that ought to have been done (and I'm certain I'm not alone) but her situation is so extreme that it defies all logic or even compassion. 

Zamboni

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Re: The worst one of these ever
« Reply #2 on: November 30, 2015, 10:00:20 PM »
^Yes, her complaint at the end seems silly. There is a way out. She has to teach in public schools for 10 years while making relatively low payments based upon her actual income, and then they will discharge the rest. She is an English teacher already, so that path is pretty obvious to me. Clearly a way out, spelled out right there in the article, and a pretty darn easy way out for her considering the staggering sum she borrowed and deferred. But she doesn't want to have to pay any of it at all, that much is obvious: "But that would still mean a decade of what she describes as “futile” payments that won’t even cover her monthly interest expenses, leaving nothing to put away for retirement." I call bullshit on this. Total bullshit.

Pay some of your debt, lady. You have a fucking way out. In fact it's an easy way out considering the facts. They are not even making you pay anywhere near all of it. I bet you won't even pay enough in the income-based program while you teach public school for 10 years to cover the principle. But if you choose not to take this path of forgiveness that is available to you, then you deserve it if the IRS garnishes your wages and then takes away what little social security you might have received.

"But there’s a reason debt is often grouped with sins and frailties in ancient moral codes. Borrowing is risky, financial decisions are not always rational, and people often do a poor job of properly weighing the interests of their present and future selves."
That pretty much sums it up.
« Last Edit: December 01, 2015, 08:22:51 PM by Zamboni »

Taran Wanderer

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Re: The worst one of these ever
« Reply #3 on: November 30, 2015, 10:20:26 PM »
I wonder what it's like to live in permanent denial of reality...

vivophoenix

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Re: The worst one of these ever
« Reply #4 on: December 01, 2015, 06:47:28 AM »
I will admit student loan debt is a sensitive subject to me .

but i am confused about why a real adult  ( not the traditional ignorant college student), with kids went to a four year private school for "$26,278, which is the inflation-adjusted equivalent of about $42,000 in 2015" to major in English.  insert more time more school, child care costs and then enters the work force as a public school teacher owing  $194,603. not by accident, this was the purpose of all this education and debt! how much did she think she was going to make!?

at some point she even tries for a PhD, why?!??!?!?


also it looks like the husband was borrowing money to be a student as well. i am sorry but when i read stories with figures  magnitude i cant help but assume they are milking the system. this reminds me of some friends who purposely stay in school to dodge paying back their previous student loans.


at the risk of being attacked i will conclude by saying despite the high probability of her willful ignorance, these loans should be discharged. you should not be able to loan that much money to an English major over 20 years who hasn't in that time made  a single payment, nor worked enough to even earn SS.

what bank would look at this person and see her as a safe risk? they pretty much were gambling when they loaned to her, not investing and should take the hit.
« Last Edit: December 01, 2015, 06:53:25 AM by vivophoenix »

TheGrimSqueaker

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Re: The worst one of these ever
« Reply #5 on: December 01, 2015, 07:59:23 AM »
Given that she's a teacher, you'd think a Teach For America assignment would do it for her. Teach For America wipes away student debt in exchange for a 2-year teaching commitment, and they do pay their teachers.

Samala

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Re: The worst one of these ever
« Reply #6 on: December 01, 2015, 09:18:48 AM »
at the risk of being attacked i will conclude by saying despite the high probability of her willful ignorance, these loans should be discharged

Won't that be the end result anyway?  With the loan forgiveness after ten years the balance would be discharged, right?  Doesn't seem possible she could pay off the balance making even the minimum payments under IBR or similar program for remainder of her life.  And if they default and IRS does the garnishment they can only take so much of her disposable income (I think still 25% max?) which doesn't seem possible it would pay off the debt.

Don't you get credit for "time served" with the 10 year non-profit forgiveness?  You'd think she'd have racked up some of those years already.

KittyFooFoo

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Re: The worst one of these ever
« Reply #7 on: December 01, 2015, 09:29:32 AM »
Given that she's a teacher, you'd think a Teach For America assignment would do it for her. Teach For America wipes away student debt in exchange for a 2-year teaching commitment, and they do pay their teachers.

Teach For America forgives $4,725 per year.  If they forgave up to $410k for 2 years of service, they would be, well, more popular :)

GuitarStv

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Re: The worst one of these ever
« Reply #8 on: December 01, 2015, 09:35:00 AM »
at the risk of being attacked i will conclude by saying despite the high probability of her willful ignorance, these loans should be discharged. you should not be able to loan that much money to an English major over 20 years who hasn't in that time made  a single payment, nor worked enough to even earn SS.

what bank would look at this person and see her as a safe risk? they pretty much were gambling when they loaned to her, not investing and should take the hit.

This is quite a valid point.  We often blame the people who get loans, but rarely look too closely at the practices that put the money in their hands to begin with.

MgoSam

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Re: The worst one of these ever
« Reply #9 on: December 01, 2015, 09:46:51 AM »
at the risk of being attacked i will conclude by saying despite the high probability of her willful ignorance, these loans should be discharged. you should not be able to loan that much money to an English major over 20 years who hasn't in that time made  a single payment, nor worked enough to even earn SS.

what bank would look at this person and see her as a safe risk? they pretty much were gambling when they loaned to her, not investing and should take the hit.

This is quite a valid point.  We often blame the people who get loans, but rarely look too closely at the practices that put the money in their hands to begin with.

That's another criticism I've heard about the student loan industry. An English major is essentially given the same rate as an engineer's major, whereas the probably of repayment is far higher with certain degrees. From a public policy point of view, I can see why this is, it would be hard to fully implement a plan where someone is accepted to a good school but can't enroll because his/her major is not "feasible."

Making Cookies

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Re: The worst one of these ever
« Reply #10 on: December 01, 2015, 09:48:31 AM »
Don't know about you but I wouldn't want to "out" my finances like that. You might get some support from people who like you are in denial but everyone else is going to peg you as an idiot.

dude

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Re: The worst one of these ever
« Reply #11 on: December 01, 2015, 10:13:11 AM »
For me the biggest takeaway here are the actual numbers -- only 1.8% of borrowers owe more than $150,000, with the average being only $30,000.  $30,000 is NOT in insurmountable sum of money to pay back for any but the brokest mother@#$%ers!  And this woman with her $410k is certainly doing her part to skew the average up!  So the student loan "problem" seems not to be quite the problem the media and others keep making it out to be -- or at least it is NOT a widespread problem.  That being said, F the college-industrial complex -- they are making shitloads of money on the backs of average Americans, and their excess should be curbed.

cautiouspessimist

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Re: The worst one of these ever
« Reply #12 on: December 01, 2015, 11:22:16 AM »
Quote
At age 48, she wanted to begin saving for retirement

WHAT? I wanted to start saving for retirement when I was 20...

Beaker

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Re: The worst one of these ever
« Reply #13 on: December 01, 2015, 11:51:47 AM »
"But yeah, issuing infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when lending monstrous piles of money, is kinda evil."

Fixed below:

Taking out infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when borrowing monstrous piles of money, is stupid.

They're not mutually exclusive, and I'd say both are right. Offering an exploitative deal like that is kinda evil, and accepting it is stupid. Pretty much the same as any other scam out there, except that it's usually not the government making that kind of offer.

MgoSam

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Re: The worst one of these ever
« Reply #14 on: December 01, 2015, 01:04:56 PM »
Quote
At age 48, she wanted to begin saving for retirement

WHAT? I wanted to start saving for retirement when I was 20...

On this site, I consider myself a bit of a late-bloomer for waiting until I was 24...

JAYSLOL

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Re: The worst one of these ever
« Reply #15 on: December 01, 2015, 01:51:30 PM »
I do have some sympathy for her.  It takes more than just yourself living in a dream world to end up $400k in the hole, people around her likely enabled the reckless borrowing.  However, if she had done what any sane person should do, she would have said "fuck this" after not getting a job with an English major in the 90's and become a waitress or something and paid off those student loans in well under 10 years instead of doubling down by going back to school again, and then again, and again...

Prairie Stash

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Re: The worst one of these ever
« Reply #16 on: December 01, 2015, 01:53:50 PM »
I have felt for a while now that crippling student debt cases (we have our own moderately crippling one) are primarily a problem of naive, awful decisions.  And this article acknowledges that pretty freely, at least in her case.

But yeah, issuing infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when lending monstrous piles of money, is kinda evil.

http://www.nytimes.com/2015/11/29/upshot/student-debt-in-america-lend-with-a-smile-collect-with-a-fist.html?_r=0
Is it hard to get a job in the public sector? I'm thinking a system that allows you to get forgiveness of $410,000 in 10 years has a nice built in escape clause. I'm from out of country, this seems pretty straightforward in resolving.

MgoSam

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Re: The worst one of these ever
« Reply #17 on: December 01, 2015, 01:54:33 PM »
However, if she had done what any sane person should do, she would have said "fuck this" after not getting a job with an English major in the 90's and become a waitress or something and paid off those student loans in well under 10 years instead of doubling down by going back to school again, and then again, and again...

That's the crux of the problem, imo. When I graduated college, my parents and family encouraged me to go to law school or go back and get a graduate degree in anything to help find a job. I'm sure that this happens to many people, and it doesn't really help for quite a lot of them. It's really sad though, that there aren't jobs for people that are eager to work hard, but that's the reality of it. Now if only we could stop telling people that college was a golden ticket...

JAYSLOL

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Re: The worst one of these ever
« Reply #18 on: December 01, 2015, 02:07:48 PM »
However, if she had done what any sane person should do, she would have said "fuck this" after not getting a job with an English major in the 90's and become a waitress or something and paid off those student loans in well under 10 years instead of doubling down by going back to school again, and then again, and again...

That's the crux of the problem, imo. When I graduated college, my parents and family encouraged me to go to law school or go back and get a graduate degree in anything to help find a job. I'm sure that this happens to many people, and it doesn't really help for quite a lot of them. It's really sad though, that there aren't jobs for people that are eager to work hard, but that's the reality of it. Now if only we could stop telling people that college was a golden ticket...

Yep, absolutely.  I have a friend that went to an expensive university and took Political Science.  Guess what?  The only "jobs" that were available to him in his field after graduating were unpaid internships from what he told me. 

Jouer

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Re: The worst one of these ever
« Reply #19 on: December 01, 2015, 02:40:13 PM »
Jobs exist. They don't all pay well at the beginning. They may not be in your area. But they exists. I moved half way across the country after university for a $28k/yr job because it was a better offer than in my home province. Didn't take long to double my salary once I got some experience and a solid network developed.


Mr. Green

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Re: The worst one of these ever
« Reply #20 on: December 01, 2015, 02:59:12 PM »
Wow. Given the statistics that show how such a large percentage of people don't understand money, compounding, etc. I'm not surprised that she claims surprise at the total. At the interest rates she was borrowing at and then not paying, she was basically digging a hole with debt as fast as the stock market would have done for her with investments. That's a stunning example.

MrsPete

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Re: The worst one of these ever
« Reply #21 on: December 01, 2015, 04:58:57 PM »
The article says she made "a series of unremarkable decisions" and that her "circumstances are not unique".  I don't think so:  Most of her decisions were stupid. 

- She didn't choose to get an education while she was young and unencumbered by childcare issues.
- When she returned to school, she chose an expensive private school (though, admittedly, with her husband working, she might have been limited to a school near her existing home -- again, she didn't choose to do this at a time in her life when it would've been easier). 
- Instead of going to work to repay this debt, she attended law school ... but quit after three semesters.
- Her husband went back to school at the same time, also borrowing.
- She borrowed for child care. 
- She became sick -- okay, that one is no fault of her own. 
- She started working as a teacher, and returned to grad school for five years.  Again borrowed for child care (surely those  kids must be aging out of child care by this point).  The article does not mention whether she finished her masters or not.
- She cashed out her teacher retirement; thus, she has no pension to count upon (and not enough years in the system to collect a pension anyway). 
- She and her husband lost their house, so she has no equity. It also suggests that their financial mistakes aren't limited to student loans.
- She started teaching in a parochial school (note to non-teachers: private schools pay about half what public schools do AND typically they don't provide retirement benefits). 
- She enrolled in a PhD program, but -- again -- didn't finish.
- She borrowed for her kids' college education. 
- She has worked relatively few years, so she has little built up in Social Security. 
- And in all this time -- 25 years! -- she has never made a single payment.  How can that be?

No, I don't see a series of unremarkable choices -- I see a lifetime of bad financial decisions, a long string of doing what's easy right now and figuring the future'll take care of itself.

In all seriousness, this woman would've been better off becoming a teacher assistant -- or even a substitute teacher.  These jobs require very little in the way of training.  True, she would've only made half as much money as a teacher, but she also wouldn't be in this debt. 
« Last Edit: December 01, 2015, 05:02:36 PM by MrsPete »

Zamboni

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Re: The worst one of these ever
« Reply #22 on: December 01, 2015, 08:52:44 PM »
I'm going to strongly disagree about the entire thing being discharged. She hasn't paid anything! Not a dime. Yes, the lenders should be stuck with some of it, and they undoubtedly will be as she still doesn't have much earning power, and I'm fine with that (unfortunately we all end of paying for this stupidity indirectly.) But to say it should all be discharged just rewards extremely poor form by this lady.

The only people who have my sympathy in this scenario are her children, who didn't really have the benefit of a stay at home mom's time or a working mom's income, then had to live through what sounds like a particularly horrible divorce, and now as adults will be burdened with keeping their two dimwit elderly parents out of abject poverty.

jinga nation

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Re: The worst one of these ever
« Reply #23 on: December 02, 2015, 08:07:39 AM »
"But yeah, issuing infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when lending monstrous piles of money, is kinda evil."

Fixed below:

Taking out infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when borrowing monstrous piles of money, is stupid.

They're not mutually exclusive, and I'd say both are right. Offering an exploitative deal like that is kinda evil, and accepting it is stupid. Pretty much the same as any other scam out there, except that it's usually not the government making that kind of offer.

After living in DC my whole life, and working indirectly for the government, I can tell you with 100% confidence that the government is not evil, it is simply stupid.  The government doesn't put out student loan programs in order to take advantage of people, on the contrary it tries to help too many people that shouldn't be helped.
+1
The US Gubmint is a bunch of incompetent do-gooders who try to appease everyone (incl. Corps. since they are people now) and gets fucked from all directions.
The Kenyan Govment is a bunch of incompetent no-gooders who try appease themselves and fucks everyone (not Corps since they aren't people) from all directions.
Be happy with what you have, as it could be worse.
I'm speaking from 18 years of experience.

MgoSam

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Re: The worst one of these ever
« Reply #24 on: December 02, 2015, 09:31:12 AM »
"But yeah, issuing infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when lending monstrous piles of money, is kinda evil."

Fixed below:

Taking out infinite, nondischargeable debt with zero consideration of risk, future income, existing debt, or other basic shit a sane person would consider when borrowing monstrous piles of money, is stupid.

They're not mutually exclusive, and I'd say both are right. Offering an exploitative deal like that is kinda evil, and accepting it is stupid. Pretty much the same as any other scam out there, except that it's usually not the government making that kind of offer.

After living in DC my whole life, and working indirectly for the government, I can tell you with 100% confidence that the government is not evil, it is simply stupid.  The government doesn't put out student loan programs in order to take advantage of people, on the contrary it tries to help too many people that shouldn't be helped.

See Hanlon's Razor. I've found that I've become a happier person since I stopped taking a lot of things personally as a result of remembering it multiple times a week.

Threshkin

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Re: The worst one of these ever
« Reply #25 on: December 02, 2015, 10:16:29 AM »
Quote
A private sector lender approached by a potential borrower with no assets, a modest income and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an additional $7,800. But thatís exactly what the Department of Education did for Ms. Kelley in 2011. Legally, it could do nothing else.

Don't blame the lenders.  Blame the government for implementing regulations that prevent sensible lending.

NorCal

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Re: The worst one of these ever
« Reply #26 on: December 02, 2015, 11:36:31 AM »
I recently met a lady who one-upped this article by an order of magnitude.  This lady was in her late 30's with three kids, and hadn't really worked ever.  I'm don't think the husband/father/babby-daddy (I never got the story on that) was involved in any way.

She told us the wonderful story about how she accrued some massive amount of loans to cover her undergraduate degree, and managed to never pay a dime on it.  She had most recently dropped out of an MBA program with a semester to go.  She had taken on somewhere near $250,000 in student debt to pay for the MBA while living in the bay area with no job or other financial support.  She also managed to get her kids enrolled in one of San Francisco's high profile private schools.

But don't worry, she had a plan.  She was going to sue the MBA program to void the $250K in debt (don't ask too many questions here).  Once this debt was voided, she would have the debt capacity to go to the law school she always wanted to.

She did express her sympathies about how hard dual-income families like mine had to work these days.

coffeefueled

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Re: The worst one of these ever
« Reply #27 on: December 02, 2015, 12:18:17 PM »
I think student loans are one of the many responsibilities even otherwise smart people don't fully understand until they have them. I was never a big spender or had credit card debt, but I got student loans to pay for grad school because that was how everyone I knew paid for school. I don't think I fully grasped what being in debt meant until I had to make payments every month for years without seeing any change in the principal.

However I'm against forgiving debt for people, particularly those with compounding decision stupidity. Similar to having kids and pets, debt is a responsibility brought about by a person's actions. I don't think people should be able to just get rid of them because they didn't think about the consequences of their choices.

(For what it's worth, I made the last payment on my $40k student loan in September. Yea debt free once again.)

ShoulderThingThatGoesUp

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Re: The worst one of these ever
« Reply #28 on: December 02, 2015, 12:54:24 PM »
Quote
A private sector lender approached by a potential borrower with no assets, a modest income and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an additional $7,800. But thatís exactly what the Department of Education did for Ms. Kelley in 2011. Legally, it could do nothing else.

Don't blame the lenders.  Blame the government for implementing regulations that prevent sensible lending.

What type of student loan policy should the government apply?  Cap the amount of student loans you can take out?  But what if there is a med student getting straight A's who takes out 300k in debt because his family is broke but when he graduates he is able to pay it off and then become a millionaire?  Or should the government limit the amount of student debt for those who are not majoring in something useful in the marketplace? Or someone getting bad grades?  What level of government intrusion should we accept here?

Just make them dischargeable in bankruptcy and stop subsidizing them. Tuition costs will decrease and banks won't try to pile as much loan as possible on people.

marty998

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Re: The worst one of these ever
« Reply #29 on: December 02, 2015, 01:12:41 PM »
Quote
A private sector lender approached by a potential borrower with no assets, a modest income and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an additional $7,800. But thatís exactly what the Department of Education did for Ms. Kelley in 2011. Legally, it could do nothing else.

Don't blame the lenders.  Blame the government for implementing regulations that prevent sensible lending.

What type of student loan policy should the government apply?  Cap the amount of student loans you can take out?  But what if there is a med student getting straight A's who takes out 300k in debt because his family is broke but when he graduates he is able to pay it off and then become a millionaire?  Or should the government limit the amount of student debt for those who are not majoring in something useful in the marketplace? Or someone getting bad grades?  What level of government intrusion should we accept here?

I'm interested in the line that says the government should decide what is useful in the marketplace...

Seems to me the government funding everything the same upholds the principle of equality, and then the market sorts out what is useful or not when you try and make a career out of your degree.

Beaker

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Re: The worst one of these ever
« Reply #30 on: December 02, 2015, 01:20:19 PM »
Quote
A private sector lender approached by a potential borrower with no assets, a modest income and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an additional $7,800. But thatís exactly what the Department of Education did for Ms. Kelley in 2011. Legally, it could do nothing else.

Don't blame the lenders.  Blame the government for implementing regulations that prevent sensible lending.

What type of student loan policy should the government apply?  Cap the amount of student loans you can take out?  But what if there is a med student getting straight A's who takes out 300k in debt because his family is broke but when he graduates he is able to pay it off and then become a millionaire?  Or should the government limit the amount of student debt for those who are not majoring in something useful in the marketplace? Or someone getting bad grades?  What level of government intrusion should we accept here?

Just make them dischargeable in bankruptcy and stop subsidizing them. Tuition costs will decrease and banks won't try to pile as much loan as possible on people.

If they are dischargeable in bankruptcy, med students could go bankrupt upon graduation and then have a huge income using their free intellectual capital.  Lenders would therefore not be willing to lend, and there would be no more student loan market or rates would go through the roof.

Which is exactly how we ended up in the current situation.

I'd like to say that there should be a required "class" (maybe just a session or two) in which prospective borrowers have to calculate their estimated debt load (based on graduation rates, cost/year, etc), expected earnings increase (based on dropout rates, salary out of college, placement rate, etc), and expected payments.

Of course people, especially 18 year olds, are great at ignoring that kind of thing and just finding the answer they need to give in order to get their money. So I think student loan papers should be signed in blood to get their attention. That's extreme in most cases, but seems appropriate for non-dischargable, government-sponsored debt.

No Name Guy

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Re: The worst one of these ever
« Reply #31 on: December 02, 2015, 01:51:26 PM »
If they are dischargeable in bankruptcy, med students could go bankrupt upon graduation and then have a huge income using their free intellectual capital.  Lenders would therefore not be willing to lend, and there would be no more student loan market or rates would go through the roof.

You assume that the court would blindly discharge the debt of a Med Student who is actually going into medical practice, who actually borrowed the money to go to med school, etc......yeah......wouldn't happen.  More like if a deadbeat just finishing up med student tried to Chapter 7 their way out of the debt, the lender would rightly object and certainly succeed in forcing a Chapter 13 on said deadbeat.

No.....with reasonable reform and getting the Govt out of the Student Load Racket (and yes, it IS a racket), there would be a balanced market for student loans at rates that reflected actual risk. 

There would be a market where 1st generation college want to be's, who barely made it out of High-School would be told "yeah......you want to go to a private school at 40k / year, live in the dorm and study Medieval English Lit?  Mmmmm......sorry, not going to lend you a dime on that plan.  In fact, you're not college material and your proposed course of study is a luxury good, not a practical degree, and never matter the ridiculous manner in which you propose to do it - private school?  Pffffftttt!  Learn a trade.  If you still want to go to college and study Medieval English Lit, pay your own way."

Where instead if this person instead proposed going to the local CC while living at home and were only borrowing a fraction of the tuition to study, say nursing, a prudent lender would consider that a bit more reasonable risk considering the cost, likelihood of finishing and economic outcome if the person successfully completes the program, especially if the prospective student in question had their own skin in the game.

nobodyspecial

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Re: The worst one of these ever
« Reply #32 on: December 03, 2015, 06:46:06 AM »
The problem is that what is prudent to a lender depends on the market.
With the alternatives being 2%Treasury notes or 2.5% mortgages this year I (as a lender) would be desperate to give student loans to anyone who could fog a mirror. In another decade with a falling stock or housing market I might not be willing to lend money to the child of Stephen Hawking and Warren Buffet wanting to study financial math.

It would be very difficult to run a university if the enrollment went up and down like the house building market.

vivophoenix

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Re: The worst one of these ever
« Reply #33 on: December 03, 2015, 07:03:15 AM »
The problem is that what is prudent to a lender depends on the market.
With the alternatives being 2%Treasury notes or 2.5% mortgages this year I (as a lender) would be desperate to give student loans to anyone who could fog a mirror. In another decade with a falling stock or housing market I might not be willing to lend money to the child of Stephen Hawking and Warren Buffet wanting to study financial math.

It would be very difficult to run a university if the enrollment went up and down like the house building market.

by that logic wouldn't all other types of consumer loans be cyclical as well?

mortgages, car loans, personal loans, credit cards

nobodyspecial

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Re: The worst one of these ever
« Reply #34 on: December 03, 2015, 08:58:07 AM »
The problem is that what is prudent to a lender depends on the market.
With the alternatives being 2%Treasury notes or 2.5% mortgages this year I (as a lender) would be desperate to give student loans to anyone who could fog a mirror. In another decade with a falling stock or housing market I might not be willing to lend money to the child of Stephen Hawking and Warren Buffet wanting to study financial math.

It would be very difficult to run a university if the enrollment went up and down like the house building market.

by that logic wouldn't all other types of consumer loans be cyclical as well?

mortgages, car loans, personal loans, credit cards
Except the student loan market is much more monolithic. The loans are all taken out at the same time of year, for the same amount and the same duration and the borrowers are much more similar.

Home construction can also ramp up and down easily. It's hard to close Harvard for a year and then ramp back up the next september

maco

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Re: The worst one of these ever
« Reply #35 on: December 03, 2015, 09:46:17 AM »
Quote
A private sector lender approached by a potential borrower with no assets, a modest income and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an additional $7,800. But thatís exactly what the Department of Education did for Ms. Kelley in 2011. Legally, it could do nothing else.

Don't blame the lenders.  Blame the government for implementing regulations that prevent sensible lending.

What type of student loan policy should the government apply?  Cap the amount of student loans you can take out?  But what if there is a med student getting straight A's who takes out 300k in debt because his family is broke but when he graduates he is able to pay it off and then become a millionaire?  Or should the government limit the amount of student debt for those who are not majoring in something useful in the marketplace? Or someone getting bad grades?  What level of government intrusion should we accept here?
Bad grades are a valid way to lose financial aid. You can still get private loans if you have someone willing to cosign one, but after failing a class you can't get government loans anymore or grants from the school.

nobodyspecial

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Re: The worst one of these ever
« Reply #36 on: December 03, 2015, 10:09:41 AM »
Bad grades are a valid way to lose financial aid. You can still get private loans if you have someone willing to cosign one, but after failing a class you can't get government loans anymore or grants from the school.
A suspicion that this would lead to straight A's on every course by a university not willing to lose a student.

I went to university in europe when there were no fees but only 15% (IIRC) went.
Fees were introduced with a capped maximum amount which, market forces, became the set price - with the aim of 50% going to uni.

Friends who still lecture say complain that they can no longer refuse to accept unqualified students onto courses or fail students. They are also subject to student evaluations - give easy exams, allow extensions and provide all the notes so students don't need to attend = good evaluations and you keep your job and the university keeps a profitable student.


Proud Foot

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Re: The worst one of these ever
« Reply #37 on: December 03, 2015, 10:44:16 AM »
Quote
A private sector lender approached by a potential borrower with no assets, a modest income and $350,000 in debt who had never made a payment on that loan in over 20 years would not, presumably, lend that person an additional $7,800. But thatís exactly what the Department of Education did for Ms. Kelley in 2011. Legally, it could do nothing else.

Don't blame the lenders.  Blame the government for implementing regulations that prevent sensible lending.

What type of student loan policy should the government apply?  Cap the amount of student loans you can take out?  But what if there is a med student getting straight A's who takes out 300k in debt because his family is broke but when he graduates he is able to pay it off and then become a millionaire?  Or should the government limit the amount of student debt for those who are not majoring in something useful in the marketplace? Or someone getting bad grades?  What level of government intrusion should we accept here?

Personally I think the government should have a cap on the loans and have the caps separated by the type of school.  One cap for undergrad and then a separate cap for each different broad type of graduate school. For example $40k for undergrad, $100k for law school, $200k for medical school, etc. I would hope this would make the students/parents think beforehand about the cost of the school they go to.  I think it could drive down some of the tuition costs as fewer students will attend schools with a 4 yr tuition cost above the loan cap.

maco

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Re: The worst one of these ever
« Reply #38 on: December 03, 2015, 10:47:34 AM »
Bad grades are a valid way to lose financial aid. You can still get private loans if you have someone willing to cosign one, but after failing a class you can't get government loans anymore or grants from the school.
A suspicion that this would lead to straight A's on every course by a university not willing to lose a student.

I went to university in europe when there were no fees but only 15% (IIRC) went.
Fees were introduced with a capped maximum amount which, market forces, became the set price - with the aim of 50% going to uni.

Friends who still lecture say complain that they can no longer refuse to accept unqualified students onto courses or fail students. They are also subject to student evaluations - give easy exams, allow extensions and provide all the notes so students don't need to attend = good evaluations and you keep your job and the university keeps a profitable student.
"would lead"???

I wasn't saying "hypothetically, failing students should lose financial aid." I was saying "failing students already do lose financial aid." It's not just failing either. Two incompletes will also disqualify you from financial aid. That's how I lost financial aid my last semester--I took an incomplete (my second one) the semester before.

MgoSam

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Re: The worst one of these ever
« Reply #39 on: December 03, 2015, 12:12:49 PM »

What did I do differently?


I'm guessing that you're part of the 1.8% due to an accumulation of undergrad and grad tuition, and not due to neglect or a failure to make regular payments. In addition, your debt was accumulated due to getting a degree in a field that I assume has led you to making a decent living (periods of unemployment not withstanding).

Someone that's gone to undergrad and then dropped out of grad school likely is someone that isn't going to be making regular payments due to ____ (insert reason here). They are also the same types that blame their school for their inability to get a job, as if the school is directly responsible for placing them in a high-paying job that they enjoy.

No Name Guy

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Re: The worst one of these ever
« Reply #40 on: December 03, 2015, 01:44:30 PM »

The med student would have the money and the incentive to hire lawyers to find loopholes in bankruptcy law.

And I guess we can agree to disagree but I think it's ok if people want to study the humanities during college, as long as they must pay the price if they can't find a job.  Besides, I think they can find a job if they work hard and know the right people even if they majored in English.

Well, by definition, if the med student has the money.....then the lender gets first crack, and further evidence on their argument that the student in question is merely trying to commit bankruptcy fraud.  And arguing for loopholes merely makes my point about carefully re-crafting the bankruptcy code if student loans would become dischargeable.

Oh, and the point is:  The, the students, DON'T pay the price if they can't find the job.  The US Government and the taxpayers do as the ultimate guarantors of the student loan debt.  The lender gets paid, no matter what.  Zero risk.  Student's, as the OP article points out, don't actually have to pay if they're deadbeat enough....or they do an IBR, or whine, as is the current case, for a mass forgiveness, etc, etc, etc.  The tax donkeys pay the lender, the student skates out.

As for
Quote
It would be very difficult to run a university if the enrollment went up and down like the house building market.

Well, then the Universities would need to change their business practices so as to insure a steady stream of students willing to buy their product and NOT be dependent upon a fickle loan market, wouldn't they?  Hmmmm how could they do that.....one wonders....Bingo.....by actually lowering the cost of the product to something like what a typical middle class family could afford to pay, out of pocket for.

There's a reason that college tuition inflation has been at asinine levels and it's directly related to the dump truck loads of money that the student loan racket is making available.

Goldielocks

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Re: The worst one of these ever
« Reply #41 on: December 03, 2015, 06:22:15 PM »
I wonder what it's like to live in permanent denial of reality...
Looks to me like it ends in divorce, extended child custody battles, and debt.  Lots and lots of debt.

I don't understand why parent plus loans are granted without consideration on risk, though. The kids loans were already capped.

Anyone guess how many years she has a actually worked?  Less than 10, maybe?

blueflipflop

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Re: The worst one of these ever
« Reply #42 on: December 07, 2015, 05:33:04 PM »
I read this whole thread with interest as I actually do Exit Loan counseling for students that are close to graduation.

I wanted to point out a few things that were mentioned although I won't quote them because a lot was said.

Currently and for the last 5 years EVERY time(semester) a student takes out a student loan they must complete entrance counseling. This tool walks students through what their current loan balance is, how taking out additional loans will impact them, current interest rates, etc. Student must read through the information and fill in the blanks to advance to the next screen.

Having watched students fill this out, most (not all) are not considering the implications of the entrance counseling and what it is trying to tell them, it is another item to be checked off the to do list. 

Second I am not sure when this began but currently the government only provides loans to parents if their credit checks out. Are their standards and metrics those of a mortgage lender or financial institution, I can't really say but they don't lend to people who are risky. The woman in the article may have received Parent loans before this was put into place, or their lending metrics are low and she was considered eligible.

Currently you must pay taxes on any loan forgiveness received by the government. Just like debt write off it is viewed as a gift for the year in which the loans are forgiven (although not necessarily taxed the way "gifts" are)

Last there are two things happening here which the article does not discuss, we have government programs and non-profits all PUSHING students to go into some form of higher education, typically four year. We are selling students on this idea and telling them don't worry about it there is financial assistance (you can see this for yourself here: http://youcango.collegeboard.org/?navid=bf-ycg ) but there is no real discussion about the true impact of what "assistance" could mean.

Have hope though because many students are concerned with student debt, they do not want to take out student loans and many are trying to figure out how to pay them off early (this could be a small subset that I see as I am charged with helping students become educated about repayment and long term financial impact). There will always be people who will stick their head in the sand and those are generally who these news stories seem to find. As someone commented earlier only 1.8% have a high balance because of poor choices (and occasionally really crappy luck, but those are far and few in between).

LeRainDrop

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Re: The worst one of these ever
« Reply #43 on: December 07, 2015, 09:18:42 PM »
The article says she made "a series of unremarkable decisions" and that her "circumstances are not unique".  I don't think so:  Most of her decisions were stupid. . . .

No, I don't see a series of unremarkable choices -- I see a lifetime of bad financial decisions, a long string of doing what's easy right now and figuring the future'll take care of itself.

Preach!

maco

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Re: The worst one of these ever
« Reply #44 on: December 08, 2015, 08:36:21 AM »
I read this whole thread with interest as I actually do Exit Loan counseling for students that are close to graduation.

I wanted to point out a few things that were mentioned although I won't quote them because a lot was said.

Currently and for the last 5 years EVERY time(semester) a student takes out a student loan they must complete entrance counseling. This tool walks students through what their current loan balance is, how taking out additional loans will impact them, current interest rates, etc. Student must read through the information and fill in the blanks to advance to the next screen.

Having watched students fill this out, most (not all) are not considering the implications of the entrance counseling and what it is trying to tell them, it is another item to be checked off the to do list. 
Maybe there should be face-to-face counseling on it. A lot of colleges have a required 1 credit class freshmen are supposed to take that introduces them to how college works. Maybe that should be in it or be a 1 credit required class too. Just clicking next over and over on the entrance counseling is pretty brainless.  Having someone there and being encouraged to ask questions might work better, and I don't mean in a 300-kid lecture hall.

One thing my college did, and I don't know if this was true all over the school or was just something the computer science department had going on, was they dedicated one day of the senior design class to finance. An emeritus professor came in and explained 401k, traditional v. Roth IRA, etc. He told us the 7/11% rule. He told us how much money $10k put into a retirement account at age 25 would be at age 65. I think he also went over how that same compounding interest applied to our loans. He basically implored us to stay frugal for at least a few years out of school to pay off the loans and start saving for retirement ASAP because those steps have a bigger impact if done younger.

Beaker

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Re: The worst one of these ever
« Reply #45 on: December 08, 2015, 09:42:00 AM »
Currently and for the last 5 years EVERY time(semester) a student takes out a student loan they must complete entrance counseling. This tool walks students through what their current loan balance is, how taking out additional loans will impact them, current interest rates, etc. Student must read through the information and fill in the blanks to advance to the next screen.

Having watched students fill this out, most (not all) are not considering the implications of the entrance counseling and what it is trying to tell them, it is another item to be checked off the to do list. 

Thanks for this, it's always nice to have a dose of reality in a thread like this. I find it heartening that there is some effort to make people aware of what they're doing, but thoroughly unsurprising that they just view it as another obstacle.

But you didn't answer the most serious question in the thread... do you think it would help if they had to sign the contract in blood?!

:)

nobodyspecial

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Re: The worst one of these ever
« Reply #46 on: December 08, 2015, 10:41:23 AM »
Currently and for the last 5 years EVERY time(semester) a student takes out a student loan they must complete entrance counseling.

Thanks for this, it's always nice to have a dose of reality in a thread like this. I find it heartening that there is some effort to make people aware of what they're doing, but thoroughly unsurprising that they just view it as another obstacle.

So you are 3 years and $X into this degree, do you want to pay 1/9 of X to complete the next term or give it all up and head over to DairyQueen,  Y/N ?

A more useful one would be: when you are 16.
Do you want to borrow $50K and spend the next 2 years of highschool and 3-4 years of college to get an arts degree which will qualify you for years of unpaid internships. Or should you start working construction / mechanic / electrician now and make $$$$ by age 30 ?

« Last Edit: December 08, 2015, 04:57:44 PM by nobodyspecial »

Beaker

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Re: The worst one of these ever
« Reply #47 on: December 08, 2015, 12:07:20 PM »
So you are 3 years and $X into this degree, do you want to pay 1/9 of X to complete the next term or give it all up and head over to DG,  Y/N ?

A more useful one would be, when you are 16.
Do you want to borrow $50K and spend the next 2 years of highschool and 3-4 years of college to get an arts degree which will qualify you for years of unpaid internships. Or should you start working construction / mechanic / electrician now and make $$$$ by age 30 ?

I don't disagree, but presumably they have to go through the whole questionnaire the before the first semester (ie, loan balance $0) which is not so different from what you said. And also before second semester (loan balance $X, do you want to pay $9*X to continue), and third semester, and so forth.