"In a move against what he called “the ethics of payday lending” in higher education, Secretary of Education Arne Duncan announced Monday that the Education Department would forgive the federal loans of tens of thousands of students who attended Corinthian Colleges, a for-profit college company that closed and filed for bankruptcy last month, amid widespread charges of fraud.
Mr. Duncan also said the department planned to develop a process to allow any student — whether from Corinthian or elsewhere — to be forgiven their loans if they had been defrauded by their colleges."
THIS is the first crack in the Dam.
I predict that all college loans loans that, until now, cant be discharged or forgiven, will soon be treated as all other loans are in bankruptcy filings. As they should be.
Those who lend money ought to be also n the hook if loans go bad.
College students should not be the only ones that have to pay the price if loans cant be repaid.
Do you want college to be restricted to only people able to pay upfront? Because that’s how you make college restricted to only people who can pay upfront. (Except for perhaps federal loans which will end up becoming a burden to taxpayers).
So, since Corinthian is out of business completely, taxpayers are on the hook right? So I wonder, why are taxpayers on the hook here but they weren’t when Bernie Madoff was convicted? What exactly is the difference we’re looking at? Only the fact that these loans came from the government?
Why not some sort of sensible reform? Perhaps some reasonable amount (we can quibble about what exactly that amount is but I think we all have an idea that’s not too different from the next person’s idea) that can’t be discharged, with any additional able to be discharged? So people can actually go to college but stupid people can’t be as stupid as they want.
The cost of debt relief for Corinthian College alone could be as high as 3.5 BILLION dollars. The education head wants to open it up to all students defrauded by their colleges including those that earned degrees.
Perhaps the idea is that loans should only be given to those who are a good risk, i.e. who are expected to be able to repay them. You know, just like any kind of loan that isn’t artificially easy to receive?
To borrow from a saying used in DC, a 0.1% here, a 0.1% there, and very soon you’re talking about real money. We can’t just keep paying out money to bail out every problem that arises.
The problem is the blatantly false idea that everyone needs to go to college. The kind of things you learn in that setting are useful for only some percentage of the population, while most others would be better suited with some form of practical education, such as trade school. Maybe without the over-inflated demand for degrees, the price of a degree would be more reasonable.
@NeoDymium: Bailing out defrauded students seems a pretty good use of 0.1%. Plus, removing the debt frees up those funds for other uses. most likely resulting in increased consumer activity and therefore both stimulating the economy and generating tax revenues.
The federal government should never have given these loans in the first place. As the lender they should have looked at the Corinthian Colleges and plenty of other for-profit colleges and denied any government loans to students there as a bad risk. Without these easy loans, the scam artist for profit colleges wouldn’t be in business.
I agree, @TatinG. I think if the federal government shut off the flow of federal funds to these “scam schools” up front (instead of waiting until they enrolled thousands of students and wasted millions of dollars) these schools probably wouldn’t have existed to begin with. Going forward, I hope that the ED continues its crackdown on these types of schools. I’m not sure that for-profit colleges really deserve federal funds, but I could be wrong and there could be some for-profit schools that really do add value and aren’t just government benefit scams. The focus should be on identifying the ones that are scams and cutting off their federal funds.
Another possible avenue would be to make student loans taken out for these colleges at least dischargable in bankruptcy, which would have the nice effect of forcing private lenders to be more diligent. I think it’s important for students and their families to have some responsibility for their financial decisions, but I don’t feel like letting lenders off the hook completely either.
I would not disagree with this “bailout”, but don’t act like 1/1000 of the entire nation’s budget is chump change. To put it another way, that is the average tax revenue from 300,000 citizens. Not a small amount of money.
It won’t just magically pay for itself because the net gain from taxes for doing this is substantially lower than the cost of debt forgiveness. There is a very large net cost to the government for doing this.
@NeoDymium: It only fails to pay for itself if you assume that, had it not been forgiven, the debtors would not have simply defaulted. These people went to Corinthian colleges so that is far from a safe assumption. It is entirely possible that the government would have to take their money with one hand while handing it back with the other in the form of assistance. Far better to put the money to better use consuming than paying some marginal figure to the government and incurring administrative expenses.
$3.5 billion for JUST Corinthian students. Even those with degrees who cant get jobs.
And the secretary of education says this is just the beginning. He also never stated it was just for for-profit schools. Someone else in the article gave this impression.
The whole student loan situation would look entirely different if we’d never started accrediting these for-profits. as an aside, I think this shows how there is a difference between “aw, all colleges are no different than other businesses” and for-real, run-for-profit colleges. There was never any sense of providing education; the goal was simply profit. And that profit will ultimately come out of our pockets, and those students’ futures.
@NickFlynn “The department estimated that if all 350,000 Corinthian students over the last five years applied for and received the debt relief, that cost alone could be as much as $3.5 billion.”
That is a direct quote from the article. What are you seeing that I am not?
Demo: I’m having trouble understanding your logic here.
There is no money to be put anywhere. The money is already gone (into Corinthian’s pocket) and spent. By the feds waiving the debt, they are just putting the burden on the total tax-paying public. As such, to relieve these students of the debt, they have to increase the debt of everyone else (since the feds run a deficit).
“The department estimated that about 40,000 Heald students would be eligible for $544 million in debt relief, if every one of them sought relief. In the past, though, department officials said, only 6 percent of students whose colleges closed asked for their debt to be discharged.”
These people are definitely eligible for relief because the colleges closed while they were enrolled or recently enrolled.
“The department estimated that if all 350,000 Corinthian students over the last five years applied for and received the debt relief, that cost alone could be as much as $3.5 billion.”
The larger group MAY be eligible for relief, but will have to get their cases in front of the special master. Everyone in this thread seems to be taking the $3.5 billion as a given, when it is pretty clear that is an absolute worst case, and the likely figure is probably considerably smaller.
