<p>^^ Yes, I know. I was trying to make the point that if student loans were to become dischargeable through bankruptcy, no private lender would ever make a student loan and the government will be the ONLY remaining source for student loans. And while I am all for saving tax dollars by cutting out unnecessary middleman, I can’t help but have concerns about that. From the Wall Street Journal:</p>
<p>“If the feds are now making and owning all such loans, expect default rates to soar. When the government hires contractors to collect on its loans, it pays them for simply calling the borrower, regardless of the result. Private lenders, on the other hand, make money from a performing loan and have a greater incentive to do careful underwriting and aggressive collection.”</p>
<p>CASmom – students who go to private lenders already max out on whatever is available through government lending first. The government loans are always a better deal and don’t require any sort of credit-qualification process. </p>
<p>I disagree with WSJ quote because the government has the ability to track and enforce debts via IRS. I mean, if the individual is employed, they are going to be paying taxes, and the government is going to be collecting. I think that’s part of the rationale behind the new law’s changes – the government benefits in the long run if the individual remains employed and paying taxes, even if coming up short on the loan payments.</p>
<p>I mean… anyone who thinks that default rates will go up with the government owning the loans has never dealt with an IRS lien and payment plan. (Miss a couple of payments with IRS and the next thing you know, your bank account has been emptied out. Oops.)</p>
<p>calmom—I am fully aware of how student loans work and that government backed loans are always tapped before turning to private lenders, for obvious reasons. My post was in direct response to catseyemarble’s post about the negative ramifications if private loans were to become dischargeable through bankruptcy.</p>
<p>OK – that’s fine – I just go along with those who feel that if the private loans were dischargaeable through bankruptcy, then the private lenders would make sure that they were only lending to individuals who were credit worthy. They’d look at the overall picture and require a cosigner or collateral. </p>
<p>It’s the same with the subprime mortgage crisis. Banks were giving loans to people who could not possibly afford to pay for the homes, by starting them out with cut rate payments that weren’t’ even enough to pay down principal. So of course it all collapsed.</p>
<p>Its not unreasonable to say that lenders need to assess whether a borrower is creditworthy, and the lender needs to assume a risk of loss if the lender is careless about its screening process. It might be reasonable to put some sort of time frame on when such a debt becomes dischargeable, so that students couldn’t simply graduate and then immediately declare bankruptcy (at a time when they are broke and probably have lousy credit anyway). If there was such a time frame, then it would provide an incentive for the lenders to also take prompt action about collecting payments-- and to write their private loans so that payments would fall due at a certain point whether or not the student was still in school.</p>
<p>I know a young lady who is $80K in debt, works in a coffee shop, has a BA in Philosophy and is now looking at graduate school, in part, because she can’t pay back her loans, and this would delay them further, and because she would rather be a student again than living the life and working the work she is now.</p>
<p>They are talking about this article at my debt support group forum now, too. It’s funny the contrast between there and here. There are a lot of terrified moms there wondering how on earth they’ll avoid making the same mistake, and wondering if it’s the only way. I stand by what I said in one of the other million threads here about student debt, this culture that is permeating our society and brainwashing people into thinking that college is the be all and end all of life is destroying people. I don’t know how we’ll ever fix it. People think that education is worth any cost, and while that idea works on the surface, for a lot of families the cost is just too high no matter what they do and the reality is that they have to get REALLY creative and find a solution, even if it means putting college on hold, and meanwhile the world is screaming, “STUDENT LOANS! EASY! SIMPLE! NORMAL! EVERYBODY HAS DEBT, JUST TAKE LOANS!” It’s just completely twisted, it’s CRAZY how many people have no clue what they are about to do to themselves when their kids wrap up high school. On CC people tend to at least think they know what they are talking about and it’s not as obvious here, but out in the real world the ignorance to the student loan crisis is massive.</p>
<p>I think that the problem is not the idea that a generic college education is essential – it is the pervasive obsession with prestige. Tuition at SUNY is quite reasonable, and a student who works while attending school should be able to manage without becoming overwhelmed with debt. It’s the concept that the person <em>needs</em> to attend their “dream” college, cost be damned. </p>
<p>A degree is a degree. The is a marginal advantage to a degree from a prestige college as compared to a degree from a no-name college, but it in no way justifies the amount of debt students are willing to take on.</p>
<p>^^There is another thread where the OP inquired about OOS public universities that offered merit aid in the form of in-state tuition. On that thread, a poster sneered that one would need to sacrifice quality in order to attend an OOS school that offered merit-based aid in the form of in-state tuition. These attitudes are pervasive and further fuel the desire to seek a degree from certain schools at any cost, regardless of the consequences of taking on a large amount of debt.</p>
<p>In my figure drawing class at a CC there was a girl who was debating whether she wanted to transfer to the Academy of Art in San Francisco (~$22k/year) which tends to offer loans, or the California College of Arts (~$33k/year) which tends to be more generous with aid. She likes both schools. I told her go with whichever one offers the most aid and will put her in the least amount of debt. Everyone in the class scoffed at me and someone literally said “well money isn’t everything” and acted like I was irrational. She wanted to major in sculpture/ceramics and be a high school art teacher in California during a time when teachers cannot find jobs. But who am I to inject logic into the considerations?</p>
<p>Personally, I’d rather go to a school that my Pell grant can cover and be debt-free upon graduation than go to the perfect school and graduate with debt. Not only does debt dictate where your money goes, it also dictates your employment. If you have loans to pay, the amount you make is more important than finding a satisfying job. The rest of my life is much more important than the next 2-3 years.</p>
<p>Our D is attending our state flagship. She was accepted to some top 20 schools. Cost was the main consideration.</p>
<p>Our main concern is whether top professional/graduate schools, overwhelmingly “private”, will start to “defend the franchise” by preferentially accepting private school students over equally or even better qualified public school students.</p>
<p>Sounds bad. But if they don’t why pay bucks for undergraduate education?</p>
<p>^^I wouldn’t worry about that. Most of the top graduate schools are in large state universities: UCLA, Michigan, etc. Even the private universities are dominated by faculty who went to the big state universities.</p>
<p>Following your rule leads to a lot of bad decision-making. First of all, all expectations are averages. Second, all decisions come with risks and the best decision is the one that has the best future expectation. However, I don’t view cost/benefit as a purely money decision, but more as a quality of life decision. I would agree that taking on large unforgivable loans with a significant chance of long-term debt slavery is a bad decision pretty much no matter what (unless the alternative was long-term poverty anyway). I would also say that a system that allows 18 year olds to become debt slaves is a bad system.</p>
<p>There are ways to avoid taking loans, if this is a concern. However, if has to be planned around kindergarden time, HS is way too late. We have used 3 approaches in our family.</p>
<ol>
<li>Graduate from CC, get professional job, continue education working full time with employer paying tuition. Worked very well with multiple employers for me and my H. all the way thru MBA.</li>
<li>Around kindergarden time, explain to a kid what it takes to get an “A” and send your child to in-state on full-tuition / full ride Merit scholarships. Worked very well with my D. who ended up never having “B” in her entire academic career and is going to be a senior at in-state with Merit $$ increasing with every year at college. </li>
<li>Since they might have plans to go to graduate school, do not retire with preference of having both parents working, unless you are millionire. Again, we are sticking to this one also.</li>
</ol>
<p>Taxguy,
I agree, one of friends S. has done it. He had to stay in army for 10 years after getting his MD though, but MD’s salary was not bad at all.
D. however, has refused to apply to West Point and all kind of other Academies when they expressed great interest in her and her sport. But as I mentioned, we are not paying for her anyway, she has worked hard enough and made smart choices and in appreciation for her efforts we have promised support thru Grad. School. And she did not even needed to use sport scholarship, stricly Merits.</p>
<p>“Lenders just may cap it at say, $5k per year or some such.”</p>
<p>Which, in combination with federal loans, would allow just about any student to get an in-state public bachelor’s degree. That’s really all that the system needs to guarantee. And private banks would probably still be willing to make much more substantial loans for degrees that have clear monetary value (undergrad degrees in engineering or accounting; MD, JD, etc.). BA in religious studies, not so much. Further, they’d probably be a lot more willing to lend for a Harvard Law degree than a Suffolk Law degree, and that’s again exactly how it should be – the Suffolk degree costs the same amount, but it is worth less.</p>
<p>The defaulter with the JD mentioned upthread is news because his situation is so unusual. Loaning someone $100,000 to go to a top-20 law school is a pretty good investment.</p>
<p>HAHAHA…you’re joking right? PSU’s and PItt’s TUITION is over 14k. This means a student would have to commute and work insanely to make that happen.
For most states, this plan would work fine, but not in PA</p>
<p>^No, that means that one needs to have what one can afford, including our dear government that does not get this very simple idea which we are telling to our kindergardeners and fully expect from them that they should get it. And yes, 5 years old is fully capable of understanding it.</p>
<p>Kids do it. I know many who commute to Pitt. They borrow the maximum Stafford, work during the summers and part time during the school year. Mom and Dad throw in some, and maybe match what the student is borrowing. If there has been some college savings, that goes in the pot too. . </p>
<p>With a zero EFC, a student can get about 2/3 of the cost covered from PELL, PA state money, and Stafford/Perkins loans. He will have to work and scrimp to pay the rest. </p>
<p>I agree that PA’s state tuition is high. We’re at half that amount here in NY, and some states are even less expensive.</p>