Congress Likely to Consider Reining In Student-Loan Programs, House Republican Says

Paying for College
41

But really… truly… how often does this happen? I see the horror stories all the time but it seems to be that they are anomalies and NOT the norm.

The vast, vast majority of low income families know that they are low income and know what that kind of debt will do to them.
Truly.
They’re not dumb.

It would actually seem to me that it’s the middle to upper income people who can’t say “no” to their kids so they take out way too many loans who are doing this more often. So I’m not sure why it is that low income families keep getting dragged through the mud.

I’m still way, WAY more concerned about what’s going to happen to Pell.

42

Same here. Pell is already too low - when it was created, it covered tuition, room, and board for low income families, and full tuition for middle income families, at instate prices. Then in the 90’s it only covered tuition to partial tutiton. Now, it covers at best one sixth to one third of cos of attendance at a public college.
Although Pell doesn’t affect the institutions favored on this website as well as many families who make more than average income, it does affect a majority of kids trying to college.
What will happen to the hundreds of thousands of kids who, each year, graduate high school and can’t afford college? There aren’t enough jobs to absorb them all, and what enormous waste of potential, what a risk taken on our future (remember that we’re now living in the knowledge economy - our future rests on having a well educated work force.)
I agree that community college should be tuition free, with students who do not borrow eligible for 15k junior and senior year. It’d encourage those who do well, and it wouldn’t cripple those who try. (Perhaps make the tuition free advantage only for students who have a C+ GPA or something, to encourage high schoolers.)

43

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The idea that some low income family earning less than $20k per year can take out Plus loans for up to COA every year is just insane.


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But really... truly... how often does this happen? I see the horror stories all the time but it seems to be that they are anomalies and NOT the norm.

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The vast, vast majority of low income families know that they are low income and know what that kind of debt will do to them.
Truly.
They’re not dumb.


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Well, I probably shouldn’t have put $20k. I probably should have put something like $40k because that would capture more. This happens more than you think. I am truly shocked at what modest-income parents are posting in the two FB college parent groups that I belong to. There are a few CC parents in that group as well and they can verify the shocking posts as we’ve discussed them many, many times outside the groups.

The issue isn’t that they “know what that kind of debt will do to them,” because THEY don’t think they’ll be paying the debt back. They don’t think the debt will affect them at all. They believe their child will pay it back once their child graduates and has some fancy paying job. They’re thinking, “hey, we’re a family living on a low/modest income of $25k-$35k+ per year, so certainly our graduated child living alone with an income of $50k-60k per year can easily put half of his salary towards debt payments. He’ll have it paid off in 5 years!” They don’t realize that a single career person earning $50k-60k per year is paying substantial taxes, rent in possibly a pricey area, and may only be able to put $5k-6k per year towards debt payments.

That said, I don’t think the vast majority of low income families are doing this. The need to change the qualification process shouldn’t be based on whether the majority are doing this.

44

<<<
Same here. Pell is already too low - when it was created, it covered tuition, room, and board for low income families, and full tuition for middle income families, at instate prices
<<<

While I agree that Pell is low, raising it to cover more of college costs will just cause more “games” to be played…fake separations, low income parent claiming custody when really the other parent has custody. Increase Pell substantially and you’ll have a huge incentive for people to cheat.

Think about it. Two classmates. Each will be the only one in college. One with intact parents earning $80k. The other with divorced parents earning $35k/45k each. The classmate with the $35k custodial parent will qualify for Pell. The other one won’t get anything.

So, if full Pell were raised to, say, $15k per year…

There will be a percentage of intact families (and it doesn’t have to be a big percentage, even if only 1-5% do this, it’s a huge problem), that will “do the math” and realize that if they game the system, their child’s state tuition (And sometimes more!) will get covered…just like their child’s classmate.

We already see this sort of gaming going on in Calif where households earning $80k or less get a $15k grant to cover UC tuition.

45

First, Congress seems so excitedly gung-ho about all the issues they want to open or re-open, but no way they can get to each and every one of these in 2 years. So, be forewarned something could happen, but that’s all we know, yet.

Just looking a default rates masks the burden of too-high loans, for those who are paying for them (even at 27k.) For many, it’s deferring a fuller young adulthood, how young grads invest their money in their own present (and the economy) and build toward their later secure futures. (The way to look at this, I think, is from the whole reality of the burden. Not just to look at individual stories where it works or doesn’t or just that only X% default.)

And what makes student loans “manageable” is the same process that ties new graduates for a minimum ten years. IBR is a form of ‘out of sight, out of mind.’

We took PPloans, but we knew, as Calmom did, exactly how we would pay them back. They were an ease, this wasn’t some binary decision- go to college under massive debt or not go to college at all. Families do need to make decisions wisely, look at various options, including the less expensive schools. A loan is a lock, a ball and chain, not a freebie, just because it pays the tuition bill now.

Many people think college is a guarantee of later success. It isn’t. It’s only a beginning, a hope. But we’re set on sending as many kids as possible to college, right out of high school. Maybe that needs to be re-examined. Maybe something like the GI bill, a little paying it forward. You work, you save, some matching grants, some smaller loans.

46

You have mentioned this before. But how common is such a situation compared to the situation where divorced parents are uncooperative at best and use the kid’s college funding as a weapon against each other in ongoing fights at worst (if there is any money left after spending it all on lawyers to fight each other)? From what I have seen or heard about, the uncooperative or warring divorced parents situation is far more common than a sham divorce or separation to game the financial aid system.

Note that a sham divorce or separation entails extra costs of the parents living separately versus together. Such extra costs would reduce any gains that may be gotten from gaming the college financial aid system.

47

I agree, but the above is just a byproduct of the larger problem that would make it so that higher Pell grants would not make college more affordable than they do now for anyone receiving them. Why? Because Pell grants are guaranteed third-party payments that are not tied to the user, so there is no incentive to give a better product or even the same product for the increased payments.

Therefore, the market response by colleges to increased Pell grants would simply be to raise college tuition as much as can be absorbed to get as much of this increased guaranteed payment to maximize their revenue curve without increased expenditures, i.e., more “free” money for the college coffers.

There is no incentive to do anything for the money except raise one’s price, while keeping things static for the consumer end or even going backwards. The consumer will rarely complain in that they are still going to college on “free” money, and they have no power to demand services that suit them.

The net economic result would be to raise tuition across the board for everyone. In short, it is an easy way for colleges to raise tuition and the families that can afford it will still go and the same percentage of poor families will also go to college.

The net societal result would be to increase the gap between the poor students and rich students, as rich students would be unaffected by the price increases. However, the lower tier of such students who could afford college now would decide college is not worth tit, so even richer students would increase in number on average.

Not sure these net effects are what well-intentioned people would want happen.

48

When the President and both branches of Congress are controlled by the same party, many things can get accomplished in a short time, for better or worse.

49

Then you would be knocking out borrowers like me. My AGI was in the $35K range while my kids were in college. But I had other factors that pushed up both my FAFSA EFC (non-liquid assets) and the college’s expectations of family contribution (home equity and non-custodial, non-contributing parent)

The plural of anecdote is not data. There seems to be a small fraction of parents who borrow more than they can afford – it makes sense to target reforms to that small fraction, not erect barriers that knock out the ability of lower-middle class parents to finance college at all.

I do think that it would help if parents were at least required to make interest only payments during the life of the loan. I really don’t like the idea of any type of loan that creates a negative amortization situation – where deferred payments allow interest to accumulate and increase loan balance. I would not allow my kids to take out unsubsidized loans as undergrads either, for that reason. A $5500 loan that at -0- interest while the student in school is a great deal - that same loan at any interest level – is a ripoff if the borrower is encouraged to defer making payments.

To me, the loans were a financing vehicle to extend the value of my payments, in the same way financing cars and my house allowed me to make big ticket purchases I could not have paid cash for. If I could afford to pay $10K a year toward college, that could buy $40K worth of college over 4 years, or $100K worth of college over 10 years (leaving off interest for now just to simplify the math for the illustration). But the decision was always being made based on what I could pay currently, not based on the idea that I could get free money and pay nothing.

Then you would penalize the families who are using the loans responsibly because of behavior of a small fraction, rather than target reforms to better address the mistakes of that small group. That just erects another barrier to education for the middle class, or else forces parents to work with potentially unscrupulous private lenders with fewer protections.

50

<<<
Note that a sham divorce or separation entails extra costs of the parents living separately
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Not necessarily. No one checks to see if the parents are truly living in separate locations. One parent can use a friend or relative’s address and claim to be living there, arrange to get some mail there, without incurring any add’l costs.

As for divorced parents, not all are “at each other’s throats”. There are divorced parents who will game the system, we’ve seen it here on CC. Shared joint custody is becoming more and more common. The exes may not be chummy pals, but if arranging or claiming that the child spends “one night more” at lower income parent’s home means getting a Cal Grant, they’re going to do it. Some do it “honestly,” once they know that’s the rule. I know a shared custody family who had a high joint income, and they knew (ahead of time) how FAFSA and Cal Grants worked, so they made sure that the kids spent “one more night” at their bio-mom’s home. It’s really not that hard. And frankly, no one really checks to see what the actual breakdown is of who sleeps where.

51

Of course, that would require outright lying, as well as doing enough to avoid getting caught (including having others enable them). But then people who are willing to do that are probably lying in lots of other ways (e.g. cheating on their income taxes, students exaggerating extracurriculars, etc.). Obviously, they are hoping not to get caught in all of these fibs.

Even if just going be anecdotes on these forums, the anecdotes about uncooperative divorced parents seem to be a lot more common than cooperative ones trying to game college financial aid.

52

Let’s say people are lying. (I haven’t really seen evidence other than a handful of cases, but y’know, whatever.) How is anything about cutting pell or reforming loans going to change that?

53

More than they can afford can be measured in various ways, default being only one of them. Probably outside the scope of the thread, but often parents taking out parent plus loans have under-saved for retirement.

54

To get around the paywall issue for sites like WSJ and WaPo, just Google for the name of the article and click on the link from your search results.

55

The number of non compliant noncustodial parents FAR, FAR outweighs the number of couples who divorce for financial aid.
It’s a straw man.
And it has nothing to do with Pell grants.
For those who worry about how raising Pell could make tuition increase, just tie tuition to Pell and federally require state budget to compensate, or create a 'ratio’clause.
In any case, Pell increase aren’t on the books at all. At all.

56

I still want to see evidence of people divorcing or pretending to separate in order to get financial aid. I can imagine close to zero situations where the amount of aid you get would be worth getting a separate residence, divorcing, etc

And no, I don’t mean one or two anecdotes. I want real, actual data that this is a problem. Otherwise, I agree with MYOS.

OTOH, I can easily prove that Pell is just a drop in the bucket for the neediest kids at many public, in-state schools. And, by extension, cutting them would screw these kids even worse. Especially if they’re in a state like mine that doesn’t offer any state assistance like they do in California, Florida, etc.

57

It would mostly affect Fafsa-only, no?

And that divorce would’ve had to be long enough ago to pass muster. I’d guess more grandparents provide silent support.

But the issue is loan caps or changes. Those who don’t have the money still need to be savvy.

58

Divorce? Not necessary Just claiming to be separated and living apart is enough.

The issue isn’t cutting Pell. That’s not a good idea. My point was addressing the issue that Pell needs to be significantly increased because it used to cover more than tuition many moons ago. My point is that if Pell suddenly was $15k for 0 EFC there would me more fake claims of separated parents.

I think some here think that a large or significant % needs to cheat for there to be an impact. If only 1 out of a 100 cheat, that would be a very large impact.

59

The potential of fraud or cheating exists everywhere - it is not a valid reason for influencing policy decisions – it simply is an indication of need to implement safeguards against cheating, along with significant penalties for intentional fraud. People cheat on their income taxes and falsely claim dependents,-- but that is not a reason to do away with tax credits for dependents. Some people hide income to qualify for food stamps, but that is not a reason to do away with food stamps, or an argument against increasing the possible allotment.

Government policy is tailored to what benefits the majority of people who fall within a certain class – that a small minority might abuse the system is unfortunate, but I’m guessing that that machinations in the financial aid system are dwarfed in comparison to the what goes on in defense contracting or other programs where billions of federal dollars are involved.

And it really is an insult to those of us who are single parents and struggled to put our kids through college. Even though my ex husbands income and assets weren’t listed on the FAFSA, when my son was in college, the amount the ex paid for child support for my daughter was included and reported as income – so it is not as if the ex simply was ignored.

60

So what I like best about this proposal to totally restructure student loans, give parents less choice and less control because we can’t be trusted to make good choices- is the philosophical hypocrisy. When this new administration dismantles Social Security, Medicare, the Affordable Care Act - all this will be done with the claim that individuals should have more control over their own decision-making and bear the benefits and costs of their own choices. Except, I guess, with student loans. And a handful of other minor things, like women’s health. And bathroom choice. THEN the long arm of the government is needed to “protect us.”

Instead of going after the major student loan problems - mentioned several times here - with for profit colleges, they will go after ALL student loan programs. If you think these proposals are designed to protect borrowers, you are sorely mistaken. The ideological agenda is the driving force.