Such hardship paying back thousands in educational loans. Garnishment from paychecks against their will. Just terrible. It almost makes one think the author is revving up those afflicted to support any candidate who would promise loan forgiveness or even better, free education. But don’t mind me, I’m just a cynic who reads motive into the most innocuous of discourses.
Sounds like a trendy new major.
It would have some very practical applications to managing the national debt.
If we cut taxes by 20% (which will boost economic growth by 500%), while raising taxes by 20% (which will boost revenues by 190%), the math works.
I’m honestly not surprised.
There’s students in my low-income area, with average stats, applying to NYU. A few top students have gone to UCLA, UCF, or Penn State (out of state).
I can’t imagine how high their monthly payments are!
The EFC is based on a formula that doesn’t take many things into account like what the cost of living is where you live. In addition, the EFC doesn’t mean you have this extra $30K (or whatever you are given) at the end of the year. The EFC is based on your ability to take out a loan and what the payments on the loan would be. So they find you to have $2K extra from their formula, then that translates into a higher amount based on how much loan you could afford with payments of $2K a year. In addition, they don’t take into account that whatever money you have saved, you want to divide equally by the number of children you have so they have equal loan amounts. FAFSA has you spend all your money on your first child.
Many people want everyone to think that college is for everyone regardless of GPA, desire and money and that there is all this money available. The reality is different. There is money for some but not everyone. I see postings on college confidential saying don’t they have to meet my entire need and why am I only being offered loans. People who advise on college, should advise differently and encourage community college or joining the military (with G.I. Bill) for some and not encourage them to dream big and go to the most expensive and prestigious college they can get into regardless of the amount of FA they get.
^Goodness, dare you suggest that college is something to be earned? 
:-j That’s so non-progressive - it’s PC to feel that everyone should be able to attend any college regardless of any relevant circumstances. 8-}
@Kelsmom, So I’m guessing these are the people who end up having their wages garnished?
I get how someone could end up in the position of not being able to pay the entire monthly balance of a student loan. But what is going on here when it appears they don’t feel they should have to pay, should have to try to make some kind of arrangement at all, etc.? Do they think this is just going to go away? That it SHOULD just go away?
Generally they hope it will go away, perhaps that the creditor will forget (fat chance) or that the government will offer loan forgiveness. Given that they have wages to be garnished, they are much better off paying or at the very least renegotiating the loan.
So, once the wages are garnished, are money collected to school?
The schools already have the tuition dollars. It’s the federal government that’s trying to get loans to students repaid, which it does by garnishing the wages of scofflaws.
Hm, will that help the economy?
It transfers money from former students who owe debt to financial institutions to which that debt is owed. The economic effect of that is pretty self-evident.
Though to be frank, if they have the money they should be paying. They are contractually obligated to do so.
Actually, not quite so simple. It’s a big circle.
In the first place, the feds borrow the money on the world market. (Zero to marginal impact on global interest rates.)
Then, they hand teh $$ to the student, who gives it to a college, which pays faculty salaries, food service workers, gardeners, busses, etc. (Boost to local college economy.)
Student owes debt and pays back to feds. Since we assume student is not yet a 1%'er, the money used by student-grad to pay back debt is now not available for student-grad purchases. (Negative impact to the local economy in which student-grad lives.)
Feds use the repayments to pay back its own loans (on the world market), and the profit on arbitrage on interest spread to fund other federal ed programs, such as Pell grants.
And the cycle begins again…
Considering student loans are the second-largest form of debt in the US (after mortgages), I’d say the effect of almost anything borrowers do is pretty significant. While it’s probably true that on the macro level, they don’t influence global interest rates (so repayments, which take money out of the economy, are a net negative), there’s a default rate above which Congress could move to cut student loans altogether.
Perhaps, but in what way is it “significant”? net plus, net minus, no impact whatsoever? (and yes, on a macro level since, IMO, public policy should do stuff for the ‘greater good’.)
remember, when the government borrows money, really all of us taxpayers are borrowing money.
if the government lends money to someone for school, really the taxpayers are lending the money.
^^right, and when the "government’ is making a huge return on the interest rate arbitrage, its the taxpayers who are earning that money. (Or they would be making a profit if the proceeds were not given out in other grants.)
Aren’t student loans given out by private companies on behalf of the government? So the profit goes to those companies instead.
The govt foots the bill for grants and subsidized loans out of the taxpayer’s money, of course.
Oh, and here’s a document decsribing Pell Grant funding sources: http://atlas.newamerica.org/federal-pell-grant-program#toc-funding-for-the-pell-grant-program
There are different types of student loans. For the ones that are federally guaranteed, the system is set up so that the money from the people who pay back their loans, gets loaned to a new student. When the students don’t pay back, then we the taxpayers may have to put more money into the system since everyone is offered the stafford loan. Since these loans are guaranteed by the government, anytime someone doesn’t pay it back, they are screwing every one of us.
We all have to remember that money is not free to use. There is a cost associated with loaning money to someone. While there may be some profit in some of these loans, there are also costs including the costs to send the loans to a collections agency when people default.