I think loan limits were a wise move. I was in a generation before loan limits like they are now…as a first generation, no one around me understood student loans/costs/etc. I made many mistakes. I don’t know when the loan limits started, but I am glad they put those into place.
I absolutely think the bar for qualifying for the Parent Plus Loan needs to be significantly raised. As it stands right now…if you have paid your bills on time, and can breathe, you will qualify. Sorry…that’s predatory loan practices. Many of these parents should not be able to take out loans at all…never mind huge loans.
When politicians are talking about loan forgiveness, they are talking about forgiving up to $50k or even unlimited, but they aren’t specific as to which loans. They can’t possibly be talking about forgiving private loans or Plus loans because forgiving private loans (or loans from the schools/states) would require the US Treasury to actually write a check to the private entity. THAT’S not going to happen.
If the government just forgives the loan, that would trigger debt forgiveness forms to be issued and the IRS would be there with a handout for the income taxes. $50k? $100k? in debt forgiveness? Hefty tax bill.
The numbers I’ve seen is that 11% of loans are in default. That means 89% of student loans are not in trouble. They may be using an income based repayment play or otherwise not be paying in full, but they they aren’t in default. Why should the government dismiss those loans?
The worst offenders in the college loan bus are the for-profit colleges. I can’t find the link to the latest study but someone here who is more 'net savvy than I can find it. These are the institutions giving four year degrees in Court Reporting or Tourism and Travel-- fields that don’t need a four year degree and the education they get is of dubious value anyway. Kids load up on debt and use up their Pell only to discover that they are just as unemployable as when they began. It’s nice and inflammatory to blame social workers and the kids who major in Latin American Studies- but the facts simply don’t add up that way. Are there social workers who struggle to pay off their loans? No doubt. But there aren’t enough social workers graduating to cause the kind of macro loan problem you guys are talking about. Look to the shady for-profit colleges if you want to see a problem.
Shifting the discussion a bit- yes, there are parents out there who should not be taking Parent Plus Loans. But truth be told- people do all sorts of stupid things financially. Are you really going to swoop in and save everyone from themselves? People pay for whole life insurance when what they really need is a cheap term policy which will lapse when their youngest kid gets out of college. People buy extended warranties on appliances which are pretty much worthless when you read the fine print, or file homeowners claims over a lost camera or a stolen I Phone, not realizing that the “full coverage” for the lost $350 item is going to jack up their rates by $900 per year. People lease cars when they should be buying, or buy when they should be leasing (depending on their situation). I know people who pay extra for dental and vision coverage at work because they can’t do the math to realize that they are LOSING money on the extra insurance.
Sigh. How can you help people who can’t help themselves? But wiping the slate clean for many people re: their education loans is just an invitation for them to start racking up crazy amounts of consumer debt, or buying a house they can’t afford. They can’t help it. They can’t do math, they can’t delay gratification by saving first and buying later, and they absolutely refuse to believe that houses don’t always appreciate. These are the people who know the in’s and out’s of every single credit card program out there (points vs. miles, how you get to platinum vs. gold, how to take one card and turn it into three cards with triple the credit limit) but they can’t do basic addition and subtraction? Do you really think that a loan forgiveness program or enabling them to discharge their school loans in bankruptcy helps these people in any way shape or form???
One plan I have seen indicates that debt forgiveness plan will be paid for with an asset tax on what she deems to be ultrarich households (something like north of $50 million in assets I think). Other plan talks about a tax on trading stocks/bonds. So I believe that both plans intend to cut checks to lenders. At least as I understand the proposed plans.
^^
so basically another bailout
I don’t think people realize how quickly this problem has bloomed and it doesn’t seem to be slowing down. The Federal Reserve estimated that the average monthly student loan payment increased from $227 in 2005 to $393 in 2016!
Obviously, Congress could write any bill they choose, including making loan/debt forgiveness not subject to income tax.
Indeed. As a matter of fact, one of the proponents pitched it exactly that way.
@twoinanddone - I’m in favor of private entities taking the loss, we already bailed out the banksters once
today’s slate has a decent review of two competing proposals. Worth a search and read. (not sure I can link w/o violating ToS.)
The government doesn’t seem to be very good at writing one bill, say for loan forgiveness, and remembering to fix another problem that might be caused, like the taxes due. Just my opinion. The wall street bail out wasn’t a simple bill.
Of course none of this could possibly happen until 2021 or more likely '22, but I’m not thinking it will ever happen. Also, there weren’t a lot of individuals who benefited from the bail out. Home loans weren’t just forgiven and they could stay in their homes for free. Yes, it did happen for a few people but not many.
A study from the OneWisconsin Institute finds that it takes graduates of Wisconsin universities 19.7 years to pay off a bachelor’s degree and 23 years to pay off a graduate degree.
https://www.cnbc.com/2017/07/03/this-is-the-age-most-americans-pay-off-their-student-loans.html
Why are students enslaved through debt? A community college to state school route is not a road to lifelong debt. Isn’t this all about choices?
People borrow irresponsibly. They do it with homes and cars too. They do it everyday when they can’t pay off their credit cards.
Pretty simple concept: If you borrow the money, pay it back. If you can’t, don’t borrow it and look at other options. We are full pay. We can pay. If I had to borrow the money, we would be full pay at a less expensive school. No way would I do a plus loan for any amount. I think the Federal student loan is fine if the kid is going to be in a high paying profession.
Have two kids. One in finance. He’s taking the Federal (max out is 27k) because we want him to have some skin in the game . Other is a performing artist. No way will she have any debt as it will be very hard to pay that back. That means she needs to go to a less expensive school. She’s been told that and understands it completely.
Personal choices and responsibility.
The whole concept that we would have to bailout the bad borrowers is ridiculous (and we may have to do it). If people stayed within their means we wouldn’t have this problem. I think you’d also see a very different trajectory of college costs as far fewer would be willing to pay and the market would self adjust or schools would go under do to lack of attendance.
While most the finance industry was reckless prior to the great recession, note that they did pay back all of their loans, with interest. It was quite profitable for the US government.
So in that sense, very different from bailing out student loans.
I think that PLUS should require immediate repayments to start. Giving someone to stretch a year’s tuition payment into 10 years is fine. What most parents do is wait till they absolutely have to start repaying, which is not till 6 months after kid leaves school. By then the loans are ancient history. Their minds have moved onto other life events, problems , necessities.
We took out PLUS for our first for cash flow issues It was veeery painful to pay back but we started the repayment a month after we took out the loan, and it took 10 years to complete that first disbursement. We did this for all 8 consecutive semesters and it took us 14 years to repay.
It was a planned borrowing but it really brought home to me how difficult it is to make those payments. We did this with the income that should have been easy but when all 8 terms were in play, which they were for about 6 year, it hurt. But what was our methodology did was that it brought these loans front and center to our finances instead of buried.
@tpike12 People need to learn to live within their means! I was paying $350 per month in the 90s and managed.
It always amazes me when people think others should pay for their choices and their stuff. There is no forgiveness or cancellation, it’s just a matter of shifting the cost to someone else. Which disgusts me.
Predatory lenders are taking advantage of our kids and their parents. Why have a system that allows this to happen?
It does suck bailing out the irresponsible, but what would you do if your neighbor’s house was on fire? Ignore it and let the fire spread throughout the neighborhood since they didn’t take the proper precautions to prevent a fire?
1.53 trillion and rising is a financial wrecking ball for the country. It can’t continue.
First we stop digging the hole, then we figure out who takes the financial hit while changing the system so it can’t happen again.