<p>Bchan. I <3 u. From your mouth, to god’s ears.</p>
<p>kayf and carmen…You want governmental regulation and laws changed to protect the consumer, and I agree that would be a great thing. But if consumers don’t borrow the money in the first place, banks would also end up changing their lending practices regarding student loans. It’s called “voting with your wallet”. If people are foolish enough to take the high interest loans in exorbitant amounts then the bank doesn’t make money. If a business doesn’t make money…it changes it’s business model. Plain and simple. There are multiple ways to skin this cat. Who else has to change their business model if this happens? The universities!! There will always be upper class individuals whose families can and will pay top dollar full freight if necessary. That isn’t going to change. Until such time as middle and lower class families start staying within their “affordability range” when it comes to college costs there is also no incentive to change. They’ll get their money regardless, because uninformed folks will continue to make poor decisions based on faulty premises. We all want the same result…affordable higher education. I think it’s doable (and more important) to change the process from the bottom up while you think the process change should start from the top down.</p>
<p>“Tidewater Community College, in Virginia, will soon require students to go above and beyond Education Department requirements to receive federal loan funds. Starting next fall, students who want the college to certify their eligibility for student loans must complete personal budget worksheets, outlining a ‘realistic picture of their financial situation’ both before and after graduation, and a ‘student loan repayment plan estimating how their monthly payments fit into those budgets.’” </p>
<p>“Inside Higher Education,” Apr. 14, 2011</p>
<p>Is this the solution everyone wants?</p>
<p>Denny - I actually think kids and parents who are borrowing should want to do something similar to this on their own - at least to the extent that if they borrow for an education that will only earn them a minimum wage, they realize the mathematics of that and have a plan to live a happy life within those financial parameters.</p>
<p>Both sides of this argument seem to agree that affordable education is a desirable goal - but protecting the banks and encouraging them to make bad loans guarantees that this goal will not be reached until the model completely fails. That failure is far more likely to be a generation drowning in debt than the masses refusing to sign up for “the dream of a better life”. If Americans didn’t believe that a college education was the path to a better life we would have about 3,500 fewer colleges in this country.</p>
<p>From the comments section of the article extract I posted above:</p>
<p>"No matter what anyone believes about the principles of this [pre-loan screening] practice [at TCC], the fact of the matter is that it is against Title IV regulation. A school cannot require additional steps. Eligibility requirements, by law, are 1. complete a FAFSA and 2. be enrolled in an eligible program. That is all. </p>
<p>“The Regs [further] state that if a student is elgible (sic) for Federal Loans, then they are eligible. Period. While there is some leeway in refusal to certify, that is a rarity and not a norm as TCC is trying to make it.”</p>
<p>The take-away point here is that federal educational lending practices, like them or not, are fairly well defined in statute. Changing them to protect students (and parents) from themselves will not be an easy nor an overnight matter.</p>
<p>I guess we’re back to “personal responsibility.”</p>
<p>Denny, It is very easy to change the Bankruptcy law. Well easy to draft, not so easy to get around bank lobbyists. But that would decrease predatory lending. Without any need to change anything else.</p>
<p>Love the idea that Tidewater has put forth, but I like bchan1’s point better. Parents/students should already be doing this evaluation prior to entering into any lending agreement. Trying to change laws to protect consumers is definitely (IMHO) the tougher piece of the equation to solve. As you state kayf, lobbyists and the like are in bed with the lawmakers, who are in bed with the bankers, who are in bed with the universities…etc. All these folks in bed and it’s only us getting…well, you know.</p>
<p>And bchan1…a college education is the path to a better life, but you don’t have to bury yourself in debt to get it. Too many people think they have to attend a major university to get a decent job, and that’s just not true. Never has been. Maybe if someone thinks they’re one of the fraction of a percentile of people who work for elite companies and make major bank…and if that’s the case then knock themselves out. Borrow until they puke I say. If they get the “plum” job then maybe they can afford to pay back the loans. If not, just don’t ask everyone else to feel sorry for them.</p>
<p>Wolverine - the changes need to be made both top down and bottom up - I don’t think anybody would argue that point. And there is no question that part of the problem is the middle class sense of entitlement and expectation - just like house sizes going up and kitchens that aren’t sufficient if they don’t have granite countertops or stainless appliances, our special snowflakes must go to the “dream” school no matter the cost - all of that waste and spending which, thankfully, seems to be going out of style. </p>
<p>However, up thread I mentioned that the really big problem is not with we CC types and our special snowflakes - but with the for profit schools and the predatory recruiting and lending practices that lead to uninformed and uneducated young adults being talked into signing on the bottom line for loans to finance educations meant to improve their lives, but often valueless. That arguement was discounted upthread, but if anybody would simply read the NYT article which started this entire discussion you will see that the default rates from those schools is somewhere in the neighborhood of 50%. You can blame the students if you wish, but the schools and the banks are making money on this deal. Their target audience is upsold and closed just as thoroughly as when they walk into a car dealership, but the story isn’t over when the car is repossessed. They are on the hook forever. Banks and schools need to have some level of accountability and risk in this type of sale, it can’t all be caveat emptor.</p>
<p>Not arguing that education isn’t the path to a better life (I fervently believe that it is) but once you have educational choices you have marketing, competition, rankings, evaluations and the notorious “prestige” factor. These things are all part and parcel of the free market system. They are not always conducive to logical purchasing decisions.</p>
<p>Currently, the banks are being protected from the risk of a free market. When bad practices aren’t protected they will come to a screaching halt - and it will be so much easier to educate the 17 year old about finances and responsibility when his banker isn’t setting a world class bad example.</p>
<p>Carmen…I didn’t discount your point whatsoever, in fact I agreed with it in several of my posts. Slick marketing tricks and techniques are commonplace in any sales field, and let’s face it…that’s exactly the business these admissions offices and financial aid offices are in…sales. Their job is to convince people that their product is so much better than someone else’s product that it’s worth the higher price tag. If both products are in your price range…great!! If not, why are supposedly intelligent people so willing to abandon their senses to go for the shiny object? It’s no different (other than the amounts we’re talking about) than buying a car, or a TV, or whatever. </p>
<p>Slick and slimy salespeople exist in all aspects of our society, many of whom were “trained” in these very same universities. Our daughters may really “want” the Coach purse, but the $9.99 bag from Wal Mart will be just as effective. Many parents apply the common sense principle to the little things but lose perspective in the case of college education. That’s why I mentioned the “vote with your wallet” approach. If I choose to not pay the outrageous cost to attend University X they don’t care…someone else will. If enough people refuse to pay the cost and their enrollment starts to decline then maybe they get the message. All I can do is handle my own children’s futures. I know there are many other parents who also make smart decisions and hopefully that number will continue to grow.</p>
<p>bchan1…I think it all depends on how you look at the issue. I’m certainly not in favor of protecting the banks, but I’m also not in favor of giving unscrupulous people an avenue to cheat the system by taking loans they can’t afford and having them discharged once the time comes to pay them back. It’s a darned if you do/darned in you don’t scenario. If you make the loans dischargeable, maybe the banks don’t make those loans. But what happened when banks weren’t lending mortgages to lower income people who couldn’t qualify for them? The federal government steps in an requires them to make high-risk loans to these people or face severe penalties and fines because “owning a home is a right”. You end up with loans being issued to individuals using Social Security and Unemployment as their income. Who in their right mind would grant that loan unless they were strong armed into it?</p>
<p>I see the same thing happening with higher education. The banks stop loaning the money to high-risk families and they start screaming how they’re being held back. The government steps in an forces the banks to make bad loans…again…and we still end up in a situation where the bubble will eventually burst. I’d rather have an situation where the individual families have the responsibility (there’s that darn word again) to provide the best education they can afford for their children and consequences if they choose poorly, than a scenario where they can knowingly scam the system with the government’s blessing. Seen enough of that lately.</p>
<p>How about we make some kind of compromise in between? Like make the new student loan bankruptcy law like you can only file for bankruptcy and have your student loans discharged if it is past a certain (unpayable) amount or make it so that you can only discharge a certain amount of loans?</p>
<p>chaos…Compromise would be great…but have you met Washington, DC? I really want to see individual citizens take control of this situation and be the driving force behind changing it for the better. But let’s start with the aspects of it that we can already control, since as Denny pointed out the other aspects aren’t going to change easily or quickly.</p>
<p>I really don’t think you will see any change as long as the banks are playing a game akin to shooting fish in a barrel and families are chugging along an uphill course like the little engine that could. I love the idea of voting with your feet but realistically that will not change things as long as the marketing/ranking systems exist. I see students every year who make less fiscally sound decisions not because they think they’re buying a Ferrari when a Chevy would serve the purpose; they believe that the prestige school will have returns that make it the better investment, they don’t believe they are being mislead - they believe they are making wise decisions. If they only thought this way there would be more room for progress, what we have is a modern belief system, the religion of upward mobility. Belief is a powerful thing. </p>
<p>I have never seen a significantly better outcome from a prestige school than from a good program at an affordable school for what I consider the same type of student. But the perspective of many parents is not as objective or far reaching as someone who works with hudreds of kids, so they equate the good outcome of the highly selective school with the school, and less so with the overall caliber of kid admitted. </p>
<p>If the loans were treated as other loans are, and the bank made a bad bet, I do not think the discharge process would necessarily be as easy as you think - or at least it wouldn’t need to be. In chapter 13 they would be required to pay what they could, and have their finances monitored for years - what would be wrong with that process and allowing chapter 7 only for those who were injured or disabled and unable to do the sort of work their education had trained them for? I think there is a lot of room for improvement, but bank protection is guaranteeing a continuation of the current trends that feel more and more like a death march for the average American kid and any hope for a vibrant middle class.</p>
<p>Let’s summarize the arguments so far:</p>
<p>Pros of having all types of student loans discharged after the student filing for bankruptcy:
-the student’s financial future is better
-banks and private lenders would be more responsible in terms of giving out loans</p>
<p>Cons of having all types of student loans discharged after the student filing for bankruptcy:
-students can take out over $400,000 in loans and essentially get their BS, MS, PhD, MD, DDS, MBA, Pharm D., OD, and DO, etc. for free and then file bankruptcy and get away with over $400,000.</p>
<p>I’ll say it for the tenth time. The “con” is complete BS, because lenders will not make half-million-dollar loans to college students anymore. Again, that’s GOOD. Students should NOT be able to borrow that much.</p>
<p>It would force a complete reappraisal of the college financial system, which is built atop utterly unsustainable levels of student debt.</p>
<p>Wow, articles about student debt bubble are just poppin up
Just from this week alone:</p>
<p>[Judith</a> Scott-Clayton: How Worrisome Is Student Debt? - NYTimes.com](<a href=“Judith Scott-Clayton: How Worrisome Is Student Debt? - The New York Times”>Judith Scott-Clayton: How Worrisome Is Student Debt? - The New York Times)</p>
<p>[Higher</a> education bubble poised to burst | Michael Barone | Politics | Washington Examiner](<a href=“http://washingtonexaminer.com/politics/higher-education-bubble-poised-burst]Higher”>http://washingtonexaminer.com/politics/higher-education-bubble-poised-burst)</p>
<p>Even from the atlantic:
[Is</a> There an Education Bubble? - Conor Friedersdorf - National - The Atlantic](<a href=“Is There an Education Bubble? - The Atlantic”>Is There an Education Bubble? - The Atlantic)</p>
<p>Citizens of the United States, we have a big freakin problem</p>
<p>We even have a wikipedia article:-
[Higher</a> education bubble - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Higher_education_bubble]Higher”>Higher education bubble in the United States - Wikipedia)</p>
<p>Forbes
[The</a> Coming College Education Bubble - Forbes.com](<a href=“http://www.forbes.com/2010/12/16/education-college-bubble-opinions-contributors-jerry-bowyer.html]The”>The Coming College Education Bubble)</p>
<p>Atleast, i can confidently say i predicted this one:)</p>
<p>saynotoharvard should change his name to saynotodebt. 
Also thanks for the links.</p>
<p>harvard=debt</p>