<p>To me, 6.8% is not outrageous on a unsecured loan given to every 18 yo college student with no credit record or collateral who applies.</p>
<p>Both my kids will have about $20k each in Staffords at graduation. We used the subsidized limit as the amount we expected them to borrow towards their education. If they can’t pay back $225/mo., something has gone seriously, seriously wrong.</p>
<p>I agree, and this is what’s at the heart of the Occupy movement, the sense that the wealthiest Americans – bankers foremost among them – are using the rest of us as a piggy bank and are prepared to throw us away when we’re empty.</p>
<p>"This is just the start, in my opinion. I think the taxpayers will be left holding the bag for a lot more student loan money than this … it’s the tip of the iceberg. " Yup!</p>
<p>This is just another form of wealth redistribution. Forgive government backed student loans, bill it to the children of the middle-class.</p>
<p>Forgive General Motors healthcare and retirement debts, bill it to the children of the middle-class.</p>
<p>Forgive the banks sub-prime mortgage debts, bill it to the children of the middle-class.</p>
<p>While some kids are delaying college or going to community college for two years because they cannot afford the tuition of their 4-year colleges, they are getting stuck with the bills of those who went to the four-year colleges on government backed student loans. Nice.</p>
<p>Good posts, kelsmom and countingdown. While I do think adjusting the repayment percent is reasonable, I also think that students should acknowledge their responsibility, and if they are remiss in repaying, I support the right of the government to take repayment from tax refunds, etc.</p>
<p>Why is it that those who support forgiving student loans or a bailout of student loans continue to call it “unwise lending” instead of “unwise borrowing”? Why is it that everyone wants to blame the “big bad banks” for doing exactly what their charter is…make money!! Do I agree with the bankers or like what they do?? Of course not!! But why do you not put the blame where it belongs…with the irresponsible students (and their parents who cosign for them) who borrowed more than they could possibly afford to pay back?</p>
<p>Unscrupulous lending policies CANNOT propogate without foolish borrowers lining up to be suckered in. From snake oil salesmen to used car salesman to student loan lenders…the song remains the same. It’s the way businesses have operated since businesses began. Quit rewarding people’s bad behavior…if you make foolish decisions you have to live with the consequences. If that means bankruptcy for them, then so be it.</p>
<p>Unfortunately…this argument has taken place in other threads before, and no one is going to change their mind. The common sense folks that know better than to bury themselves UNNECESSARILY in debt say “You made your bed…now lie in it” and the bleeding hearts will always be in favor of bailing out the galactically stupid.</p>
<p>"Why is it that everyone wants to blame the “big bad banks” for doing exactly what their charter is…make money!! "</p>
<p>I have no problem with the banks trying to make money, but they should try to do so by risking their own money on loans. When the loans are bad, they should not go running to Congress to pass a law to force the tax payers to cover their loss.</p>
<p>Same is true for auto companies, labor unions and solar panel companies.</p>
<p>I think it would be helpful to identify and understand which students have excessive debt and why. The Project on Student Debt site has links to various studies that Bay, among others, might find interesting. In this 2009 study, done by Mark Kantrowitz, it appears that a high percentage of those with excessive debt shared other characteristics - over 60% were independent students, over 40% were Pell recipients, etc. </p>
<p>It also turns out that those with the highest percentage of overborrowing weren’t in the liberal arts, but in public administration/social services and the health professions…occupations that are more likely to fall under the Public Service Loan Forgiveness program. </p>
<p>I think there are enough programs in place to allow federal loan borrowers to repay their loans. Adding private loans to the mix seems to be disastrous for many and it seems to be the non-traditional students who aren’t making the best choices, for whatever reason.</p>
<p>Wolverine86 "Unfortunately…this argument has taken place in other threads before, and no one is going to change their mind. The common sense folks that know better than to bury themselves UNNECESSARILY in debt say “You made your bed…now lie in it” and the bleeding hearts will always be in favor of bailing out the galactically stupid. "</p>
<p>This is so correct. </p>
<p>I don’t know what the fuss is anyway. Average is 24K with about a 7% interest rate. This is not that much different than what I borrowed 26 years ago. I went to CC and then on to a 4 year University. I borrowed 6,600 at 9% interest on a government backed loan. I paid my loan off in less than 6 years without a good job. I bought a home 3 years after graduation.</p>
<p>Glido…Unfortunately there’s no pleasing people when it comes to the student loan process. When student loans were forgiveable under bankruptcy several years ago, the qualification criteria was much more stringent and many students and their families were unable to qualify for a student loan…and they complained about it. Students were able to obtain huge loans for professional schools (Med, Law, Pharm, Vet, etc.) because the future earning potential (and payback potential) of those fields warranted the banks loaning those amounts. The downside was unscrupulous students borrowing those huge sums then declaring “bankruptcies of convenience” after graduating and magically dumping their student loans.</p>
<p>Once the laws changed to hold the BORROWERS accountable, banks were naturally going to be more willing to make loans with less stringent qualifications…and everyone was thrilled because now they could send their little snowflake to the private LAC’s that were only accessible to the “rich kids” before. They bought into the idea that “more expensive must mean better education” and borrowed beyond their means to pay for it.</p>
<p>I’d be 100% in favor of going back to a system where banks would only make loans to people who are likely to pay them back…but can you imagine the backlash when little Johnny or little Janey is “being denied the college dream” because their family doesn’t qualify for a loan to send them to their “dream school”? The bleeding hearts will rail against the big bad banks for their horrible lending practices…hmmmm…why does that sound so familiar??</p>
<p>Guess what…NO ONE in this country is being denied the college dream. There are affordable options out their for everyone…and common sense people have taken advantage of them for decades, regardless of which version of the bankruptcy laws existed, and gotten their children quality education. When people get back to obtaining the education for their children that they can AFFORD instead of the education they WANT, the system will begin to self-correct. If no one is willing to pay $50K+ per year for LAC’s and big name publics and enrollment drops, do you really think the price of a college education won’t begin to decrease?</p>
<p>momof3…Exactly!! The stats referred to earlier in the post showed that the average student debt is around $24K. Not great, but definitely a manageable amount for anyone with a modest or better salary. And I believe it said 1/3 of the students graduated with no debt, while less than 10% of graduates had these huge, unmanageable amounts of debt.</p>
<p>Once again, the foolish (but very vocal) minority is trying to drive this train.</p>
<p>Just to be clear, I’m not a bleeding heart. I was furious when the government decided to wipe out the chrysler bond holders in favor of the labor unions in the auto bailout restructuring. I don’t belive credit ought to be so easily available, particularly in the form of loans gauranteed by the federal government.</p>
<p>However, when we bailed out the banking industry, and I’m not talking about TARP here, I’m talking about allowing these institutions to take money from the FED at 0% interest to invest and recoup the losses they incurred through their own bad investments, or the AIG funneling operation, which simply, at cost to the taxpayer made these institutions whole on risky inadvisable investments, we put ourselves, as a nation, in the position of having to explain this to the middle class.</p>
<p>I am not middle class. I"m part of the so-called 1%. But, I can see no benefit in not extending a similar courtesy to the new graduates who cannot find work, who made what they have been advised their entire lives, was a solid and legitimate investment in an education. To allow some foregiveness in this environment, under these circumstances, seems only wise.</p>
<p>Had we not gone down the other path? We could discuss it as if we had not bailed out the banks. However, we did and so we cannot. As I said earlier, it is far too “let them eat cake,” and as we have seen in Greece, so far none of the let them eat cake crowd is ending up having won the battle. Maybe in the US these kids will believe their debt is somehow more onerus and more their responsibility than that of the banks, but I doubt it.</p>
<p>Wolverine, banks have tightened their criteria for private student loans in the past few years and most now require a cosigner for dependent undergrads. Also, the default rates for grads from the private 4-year schools has been lower than those in other categories. As noted in previous threads, excessive borrowing does not always lead to default. </p>
<p>I think what we’re seeing in the current rise in default rates are the effects of looser credit standards in previous years combined with a lack of jobs for these graduates. I don’t think that they’re complaining that they’ve been denied an education but that fact that they now can’t find a job to pay for it is a different issue altogether…and please, let’s not blame them for the current unemployment rate or assume they all picked the “wrong” major! Those who were in college during the meltdown can hardly be expected to have had a crystal ball and it appears that a number of those facing default were actually adults trying to improve their marketable skills.</p>
<p>I fail to understand how college students at the time of the financial meltdown could have been expected to understand what those who were in charge of manipulating the economy completely failed to see, and I am having a very difficult time understanding why they should be held responsible when those who had a hand in completely tanking the economy are not.</p>
<p>poetgrl…I think most of us would agree with you regarding the bailout of the banks, etc. It was a bad decision to make. So why would you be in favor of throwing good money after bad and doing another bailout for foolish borrowers of student loans? Just because they’re “regular” people instead of a large institution doesn’t mean everyone else should be any more responsbile for someone else’s bad behavior.</p>
<p>Choose whichever axiom you’d like: Don’t throw good money after bad, two wrongs (or three in this case) don’t make a right, stupid is as stupid does…the bottom line is still the same. It wasn’t right then…and it won’t be right now.</p>
<p>sk8rmom…I wasn’t referring to the current system when I spoke of people complaining about being denied the college dream. I was saying that if we return to a system where the banks only make loans to families who they can reasonably expect to repay them (a system I’m completely in favor of) you’ll still have people complaining about lending policies.</p>
<p>They’re not happy when they can’t get a loan, but they don’t want to be held responsible for the unmanageable amounts they VOLUNTARILY borrowed under the current system. Hence my observation that “there’s no pleasing some people”.</p>
<p>poetgrl…You’re “having a very difficult time understanding why they should be held responsible” for the loans that they VOLUNTARILY took out??? Are you freaking kidding me?? Should no one be held responsible for their own actions? NO ONE held a gun to these people’s heads and forced them to be stupid. They did it all on their own…and that’s how they should get out of the situation.</p>
<p>In the crony capitalism we have been practicing in the US for quite some time, the favored groups have gotten plenty of forgiveness and financial favors from the government. I don’t agree with this. However, I do believe, since we have done this and done this so repeatedly, we must do something to “even the scales,” so to speak.</p>
<p>I agree with what Obama is doing for those who are in too much debt, having borrowed too heavily, or not been able to find employment in these difficult times. I believe investing in an educated workforce is as good for our economy as having a functional banking system, frankly, and as important.</p>
<p>I think colleges and banks behaved incredibly irresponsibly. They seem to get off with no cost at all. I just see this as one of those places where we are suddenly “having principles” at the cost of the less powerful individuals while we continue to protect the institutions and thier questionable practices. In other words, what incentive is their for the banks to stop making bad loans if THEY never pay the price? What is the incentive for the colleges to bring down administrative and country club costs, if they can depend on the federal banking conglomeration to continue to subsidize their bad business practices?</p>
<p>Instead, we point to the unemployed new graduates and say, “YOU, now YOU, will pay.”</p>
<p>you don’t see how THIS creates class warfare? I certainly do.</p>
<p>I don’t have statistics in my hands but I bet more of those in default are not 4 year BA/BS graduates. I bet it was the kids that started at 4 year universities or trade schools and didn’t make it through that are defaulting. Some people just make bad decisions.</p>
<p>Exactly what I was thinking, Wolverine. EVERY single time we interfere with market forces we get chaos. In our culture, we (as a whole) think that life should be a bed of roses all the time. “Never has a generation suffered as much as ours!!!” If it’s not perfect, then we whine, complain, get impatient, and try to make corrections. It is my belief that our economy today would have been on the road to recovery had the folks in Washington let the chips fall where they may. We’ve been prolonging the misery through our “help”.</p>
<p>However, I also believe, the unfortunate fact that you cannot continue to do financial faovrs for favored political donors, be they the unions or the banks and not expect the individuals to eventually organize themselves and say we are living with the results of these governmental and financial manipulations and only we are expected to pay up?</p>
<p>Either stay out of it. (my preference)</p>
<p>or make sure there is at least some appearance of equality of opportunity for those not already in the political/institutional ivory tower.</p>
<p>Momof3, that is a good point - it makes sense that those who don’t earn a degree are much more likely to default. I don’t know if I would characterize them as bad decision-makers though without knowing more about why they didn’t finish. Were they truly that unprepared for college, experience a change in circumstances, have families to support themselves, or could they simply not afford to continue? Did they realize at some point that there would be no job at the end of the tunnel and decide not to throw good money after bad?</p>