The lenders making student loans (the federal government and some private banks) are NOT predatory lenders. They are not the payday lenders or loan sharks. The interest rates on student loans is 4-12%, which is very very low. NO ONE is forcing anyone to take a student loan.
I happen to think the student loan program is in good shape and has the right balance in providing the amount of money most people need to get them to a local college but not enough to live high off the hog while in college. If Plus loans and grad loans are eliminated or capped (and I think that they should be), it is the lower income families that will be very limited in where they can go and even IF they can go. Middle class and higher SES will figure it out, but low income families will not.
I am surprised that the average monthly payment is so low considering all the posturing and crying about the crushing debt. That the average is so manageable it reinforces to me that those drowning are doing so as a result of multiple poor choices and wanting it all now. Data point of 1. My husband and I were paying off graduate loans in the early 90s of more than $400 a month on entry level low salaries. Never once did it cross our mind that some financial aid fairy would come around and wipe out our obligations.
The income repayment plans and waiting it out for a bail out is contributing to people paying the minimum as borrowers are getting older and older with the debt compounding. Why should these young adults forgo luxuries and life experiences to pay a debt when those behind them or those living their best life squandering their money while they are young might get bailed out and debts forgiven?
Will there be rebate checks or reparations for all of us who paid our loans before this new bail out? I will line up for mine. Can I get the lost opportunity cost of all that money I paid? Can I get 20+ years of interest on that money? It seems ridiculous that those of us who paid our way, paid the way for our own children, or never had the opportunity for the college experience (likely because the money wasn’t there) will be on the hook for poor choices of some in the next generation.
Do we want another layer of government monitoring and imposing more regulations on lenders? Should the government stop providing loans for those who are likely to default? Will the life of responsible young adults be better if they do not have access to loans for school? I see the more regulations as more barriers to low and moderate income students into the educated class. In this day and age, students need less barriers to a quality education, not more.
Therein lies the rub. There is no political will to stop digging the hole. The education-industrial complex keeps crying for more students (and money), not less.
Students can stop digging the hole. As the issue is discussed more in the media, I expect fewer kids will want to go into huge debt for college. Will always be some who do but that is on them.
Making student loans dischargeable via bankruptcy suddenly puts the money of the predators at risk and they will be much more conservative with how much they will lend an eighteen year old with no collateral.
It is the bankruptcy regulations that prevent discharging student loans. There is nothing in the loans themselves that say they aren’t dischargeable.
Loans used to be dischargeable and the interest rates were much higher. My loans in the 1980-84 time period were at 9%. Those were Guaranteed student loans, $5000/yr max. When the bankruptcy law changed in 1986, student loan rates went down because the lenders had less risk. It really is that simple. If you put the bankruptcy option back into play, the rates (and qualifications) will go up. Availability will go down.
@tpike12 this is not comparable to a fire. Just because your neighbor’s kid takes out too much in loans does not mean your kid needs to as well. People today need to learn fiscal responsibility and bailing them out defeats the purpose.
It’s not. Default rates on the student loan program have rising steadily, even in relatively good economy. It’s ticking time bomb. Even subprime mortgages have colleterals. Student loans, like credit cards, don’t. Most also have low interest rates, unlike credit cards. Investors generally won’t buy these loans unless there’re some strong guarantees, mostly from the federal government (so the government is on the hook). Private student loans have only tiny market share and have much higher interest rates.
“We protect our kids with fences around pools, we make them wear helmets when they ride their bikes yet allow a system that can financially ruin them?”
College students are generally 18 or older so are adults not kids. The majority of states don’t require adults to wear motorcycle helmets and AFAIK none require them for adult bike riders.
I think the way people qualify for Plus Loans is crazy! A low income parent without credit problems could borrow the full cost of NYU…for triplets! Sure there may be some honest (naive) intent that the kids will pay the loans back, but the risks are huge that one or more of the triplets won’t be able to keep up with the loan payments.
I don’t think low income families are the main ones utilizing the Plus loans. Most people I know in the 30-40K/year income range simply aren’t helping with college at all. The kids either live at home and attend the local schools while working or don’t go at all. In our state the full Pell and state grant cover 100% of tuition at that parental income, so Plus loans aren’t required to get through.
@Twoin18 - the majority of adults aren’t financially literate enough to make sound educational investments, most eighteen year olds aren’t either. Why not protect the sheep from the wolves?
I live in an area of affluenza. I will admit I know no one struggling with student loans. (Who would admit that?) But I have an observation. When we had kids in elementary school, I was amazed at the parents who gave large gifts to the elementary school teachers, as the parents bemoaned the $50K salaries the teachers were being paid. (The parents felt $50K starting teacher salaries were too low).
This group of parents didn’t seem to think that young workers could start frugally and live in shared housing. Their attitudes seemed to push the expectation that they should be able to “live their best lives.”
This is pervasive. If one is not expected to sacrifice ( to pay the debt), how do we culturally change this expectation?
I don’t want to come off as completely uncaring, but…I already have college tuition to pay for 2 kids and don’t need to fund anyone else’s education (if we forgive student debt).
Sorry you got into so much debt, but that is not on me. Where were your parents?? Who let you get into so much debt?
You made your choices, now live with them.
I know there are a lot of hard working kids out there, but I have come across my fair share of entitled, “live my best life” ones too. Don’t complain to me about your student debt as you are jetting off to an NFL game across the country or getting your nails done for your beach vacation.
@RookieCollegeMom - if you’re addressing me, I have no student debt to forgive. I simply see a $1.53 trillion ticking time bomb that will be disastrous for society.