<p>poetgrl…The current unemployment rate is a seperate issue, and there are procedures in place to allow students to defer their payments until they’re able to gain employment. But what you’re failing to acknowledge is that the problem occurred 4-8 years prior to them possibly not being able to find a job today!!</p>
<p>The problem occurred when these students/families started down a path towards accumulating unmanageable amounts of debt when they should’ve been fully aware of the earning potential of their chosen major. Why should I feel any sympathy (or take any responsibility) for someone who borrowed $20K, $25K, or more PER YEAR to earn a degree that they KNEW (even if the economy were solid) would garner them a job earning $35K, $40K per year??? It’s basic math, and the numbers don’t add up!! The fact that the economy is down and jobs are scarce now may aggravate the situation, but it didn’t cause the problem!! Stupid decisions on where to get their education and how much to pay for it DID cause the problem.</p>
<p>I’ll say it again…when people start choosing the AFFORDABLE options available to them instead of overextending to get what they PERCEIVE to be a better education, the system will start to self-correct. And since I love pithy little sayings, here’s one more. “Fool me once…shame on you. Fool me twice…shame on me.” You’re in favor of a “Fool me Thrice” option?? No thanks. :)</p>
<p>I simply believe that we have bailed out favored group after favored group, that by the time the baby boomers (a group to which I do not belong) are all retired, there will be only two workers to pay for the social security of each retiree, and that we will further confescate the wealth creating potential of these same individuals in order to pay for their social security, since we used thier ss payments to keep THEIR taxes low and the younger generation will be expected to pay for that, as well.</p>
<p>This one thing, done for a generation which faces repayment of the debt incurred by their parents at a staggering level, might be offered an opportunity to get on their feet before they begin the lengthy process of paying for the parents who also benefitted from having no “real” debt themselves.</p>
<p>I see no real, long term benefit to the country in not assisting them in getting on their feet. They’ve got some heavy bills to pay for their parents, who basically borrowed the entire world. It is interesting to me that we want this generation to “live up to their promises” while we never look at those who were in power to live up to thiers. </p>
<p>Good luck. We don’t disagree in principle. However, the practice has been such that it is quite funny to me that we will now impose those consequences only on those who are not politically connected. If anything, I have found your responses to be quite enlightening in terms of wHY the protestors are doing what it is they are doing. I’ve never used debt. My grandfather, who lived through the depression, discouraged it. I listened to him, for some reason and it is a lesson I’ve taught my kids. </p>
<p>But, most of the borrowers were advised by professional adults. I find this to be interesting, more than the fact that 19 year olds got in over thier heads. 19 year olds get in over their head so frequently that it is just a cliche.</p>
<p>Wolverine, I’m not sure why you assume that to be the case when the evidence suggests otherwise. Students at “affordable” schools like CC’s are actually more likely to default than those at 4-year private schools…they just don’t get the press like the $100K debtors from NYU! It’s interesting that surveys completed by the federal ombudsman’s office and others who work with student borrowers revealed this:</p>
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<p>It’s also been widely reported that students at 2-year school are missing the boat on federal grant aid. I’ve personally helped a number of low-income students correct their FAFSA filings so they can receive grants instead of loans and found that the FA offices at these “affordable” schools don’t seem to have the staff to make sure that students are getting the appropriate type of awards, much less to explain the various types of student loans and repayment options. I think this would be a great area to target and measure improvement. It would seem to be low-hanging fruit, but there’s probably more to it that I’m just not seeing…</p>
<p>poetgrl…I agree with you on the bailouts of the favored groups…shouldn’t have happened but what’s done is done. I prefer to not repeat the same mistake another time, and that’s where we disagree. You “see no long term benefit in not assisting” these people, while I contend the opposite. There is no long term benefit to the country in assisting this MINORITY of college borrowers. The only benefit is to the foolish INDIVIDUAL. These articles tend to state the total amount of student debt (a staggering amount) and exaggerate the number of students who have unmanageable amounts. The vast majority of graduates have either no debt or manageable debt. Heck…I’d love to have someone come in a pay off my mortgage for me…but why should they? I borrowed within my means and am paying off my responsibility as I should. While I would benefit from having it paid off for me, there is no crisis necessitating it and I would never want my burden placed on someone else.</p>
<p>sk8rmom…I’m sure there are situations across the whole spectrum of college graduates where students go into default, but everything you quoted in your posts goes precisely to my point. Irresponsible borrowers bear the lion’s share of the blame on these defaults. If you don’t understand what you’re getting yourself into, how much you can afford to borrow, what options you have to pay back your loan, don’t fill out paperwork properly or on time, etc. then who’s fault is that?? By no means do I think the lenders are blameless in this, but NONE of these loans happen without willing victims. There is plenty of blame to go around, but I’m a big proponent of personal responsbility…and I prefer to have those individuals pay for their own mistakes…instead of everyone else paying for them.</p>
<p>Love the healthy debate folks…but I gotta go to work. Might have to start picking up some extra shifts now…in case the student bailout needs funding. Take care. :)</p>
<p>Wolverine, I’m not blaming the lenders at all but am not seeing all of the borrowers in trouble as the bad guys either…I think this has been a “perfect storm” situation with rising costs, high unemployment, and a record number of students going to college. It’s obviously becoming a big problem for many people and getting to, and addressing, the actual root causes is the only effective long-term solution. They may be in the “minority” of borrowers, but if we’re talking about tens of thousands of people per cohort and a sharp increase in that trend, it’s time to figure out how to reduce those numbers. </p>
<p>As a frequent visitor to the FA forum and someone who mentors low-income students, I have a different viewpoint than you do. Parents and especially students frequently have a hard time unravelling the “mystery” of college costs and financial aid. In my book, that doesn’t make them irresponsible, bad, or lazy people - they just don’t know what they don’t know and the everchanging, somewhat murky financial aid scene certainly isn’t helping matters! In other words, if you don’t know that you’re missing something, how would you know to look for it? I’ve heard so much misinformation coming directly from FA offices that it almost does seem like a conspiracy at times, though I know that it’s just a matter of finding the well-trained, experienced “specialist” who handles a particular loan/aid program! I do wonder how many students know that and how willing young adults are to persist questioning in the face of the cranky, overworked “professional” they’re often confronted with? My kids sure wouldn’t be!</p>
<p>Numerous agencies, studies, and even Congress have acknowledged the shortfalls in presenting clear, understandable information on college costs and financing. So I’m not sure it’s fair to characterize all of these people as “irresponsible borrowers” when they are not unwilling, but just unable, to repay loans they took with the encouragement of the federal government at a time when they thought they would be able to find a job. Btw, if you watch Arne Duncan’s interview from the other night, you’ll notice that he’s still pushing higher education, which includes vo/tech, for everyone.</p>
<p>Fairness should not be the criteria by which we make political decisions. Or we should be careful in how we define fairness. Is it fair to bail out people that have made bad decisions rather than those that pay off their debts, don’t walk away from their mortgages, etc? Is that ‘fair’ to those people?</p>
<p>Instead of forgiving student loans, how about allowing an opt out of social security taxes for new entrants into the workforce? Having an additional 7.5% in your paycheck could certainly help pay back those student loans! Isn’t it about time to start tackling some of these really tough issues like social security instead? Why aren’t we letting younger workers make their own financial decisions about their retirement, rather than requiring them to contribute to a plan that may or may not be there down the road?</p>
<p>Students have already stopped paying their loans, not because they don’t want to pay, but because there simply aren’t enough jobs anymore for the amount of grads that we are pumping out that offer economically sustainable incomes. The bubble IS starting to burst already and tax payers ARE ON THE HOOK for when it explodes. It is already written into law so there is no debating it. </p>
<p>You can thank years, and years, and years of lobbying by the banking industry for the grossly overinflated prices of colleges. The banks got politicians to write and fix the rules so that they can essentially hand out RISK FREE loans and make money no matter what on the debt they hand out—even if students can’t pay it banks still make tons of money on defaulted debt due to the government. It is yet ANOTHER EXAMPLE of unregulated financial derivatives artificially inflating a market, driving prices sky high, and subsequent bursting of the bubble. How many more financial derivative bubbles will we have to endure before we learn our lesson that we need COMPLETE financial overhaul of our system? </p>
<p>Most of the whiners complaining that people made their “own choice” really have no idea how student loans work, how student loans are derivatized and gambled upon in the stock market, and how risk free loans/derivitization are sending college tuition costs through the roof. College is now unaffordable without sizable debts for the vast majority of Americans and the bubble is starting to burst. When the dept. of education recalculates the default rate next year by calculating it out to 5 years instead of only looking out to 3 years, the default rate on student loan statistics is expected to double. </p>
<p>Can you imagine once this bubble bursts big time (which is very soon)? Banks will no longer hand out student loans, kids won’t be able get loans to pay tuitions, and colleges will have huge numbers of kids that will no longer be able to pay for school. The entire system will be paralyzed and will collapse—and it was all because of greed.</p>
<p>I don’t know why you assume it is going to explode. Forbearance mechanisms for the unemployed are already in place. For the employed, he can choose to pay off his loan or default, in which case, his credit will be ruined, and his wages and ss may be garnished. People need to grow up and pay their debts. The average pay back is $230 per month. This is not class warfare - those who took out the loans are our future leaders and white-collar workforce, not the lower classes.</p>
<p>I wonder what would be the implications of lowering interest rates from govt student loans to 2%. You can’t forgive debt that people purposefully ran up, some so they could go to the college of their choice and live in the lifestyle of their choice (vs going to a local school and living at home or in a cheap apt with 3 other people). Doesn’t matter what other bad decisions our govt has made bailing companies/banks out. We just don’t have the money to bail out every group or industry. We’re broke.</p>
<p>But bringing the interest rate down to a reasonable rate seems better than having defaults, and well, if we are loaning banks money at 0% then it seems not charging college students inflated rates would be fair.</p>
<p>Excellent post gravenworld. And very similar to the mortgage mess. </p>
<p>It was the banks who pushed the mgt companies to make those loans because they wanted to bundle them and split them up in traunces and collect huge fees once they had figured out the way to use CDO’s to spread the risk. And of course the mgt companies, Countrywide, etc., didn’t care that they put unsuspecting buyers in bad mortgages (by doing several things including forging signatures on loan docs that had different terms then agreed upon among other equally nefarious tricks they used to deceive) as the didn’t have to hold the mgt and assume any risk! </p>
<p>Standard repayment of $27K at 6.8% requires a payment of $310/month. At 2%, the payment drops to $248. </p>
<p>Bay assumes that people are “choosing” to default on student loans but does not offer a source for the assertion that “those who took out the loans are our future leaders and white-collar workforce, not the lower classes” (which I was stunned to read, btw). That apparently means that they actually have discretionary income to make loan payments after providing for immediate needs like food and shelter, which must be information that the press and government are keeping to themselves since there doesn’t seem to be any data available to support that claim. </p>
<p>Forbearance is not a good option for unemployed people as it tends to make the problem worse - when people actually get back on their feet and are able to make payments, the interest and payments have ballooned and it can take years of payments just to get back to the original amount of the student loan. IBR may be a better route for the unemployed but remember that IBR has only been around for 2 years, had some strange rules before this year (such as considering joint income for married borrowers but ignoring the other spouse’s loans) and many borrowers were not offered and are still not aware of that option.</p>
<p>when you say this is the tip of the iceberg? Do you mean you think many will refuse to repay or be unable to repay these loans? Are you seeing kids take on more and more, now? Or are they getting smarter about it then they were four or five years ago? </p>
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<p>My experience is that there are still many, many students borrowing more than they need to borrow. Many would be far better off beginning in a CC, which would reduce borrowing. Many borrow to live in the dorms, even though they are within commuting distance. Others go to colleges that cost more than they can afford when other four-year live-away options are more affordable. It’s the insistence that “I have to have that” that is a problem for so many.</p>
<p>On the grad school end, I have seen students borrow money to support a nice lifestyle … gone are the days of folding chairs, milk crates, and a bad neighborhood for so many students (undergrad, too). One particular degree program always had students in asking for more money to support their living expenses - and they ended up borrowing (grad PLUS loans) ridiculous sums of money - and this program is in a low paying field. The decisions are different than they were when I was younger. We lived frugally, because that is what we could afford. Now it seems that it’s no big deal to borrow — and that is not just in education, of course.</p>
<p>I just feel like the borrowing is done without considering the long term consequences. Seriously, I have had students tell me they didn’t know they had to repay their loans if they didn’t graduate … or they would say they didn’t know they had to pay loans back in general … or they would say no one told them about the interest. On and on and on. I think we have a financially illiterate society.</p>
<p>“If this is true, that is crazy…and these kids ought to be protesting DC on this one, not the banks.” No, this is not true. Interest rates are fixed, not variable, and they are set by Congress. When private lenders were in the Stafford loan business, they charged the same interest rates as the government lenders - that was the law. Going to Direct Lending didn’t do anything in terms of hurting students (except for sticking them with some - in my opinion - less than desireable servicers.</p>
<p>Regarding forbearance, the people who opted for this option will also want to have their loans forgiven after x years and get similar deals that are currently on the table. This article is from the “Charlotte Observer”. There is already one poster who talks about this in comment section.</p>
<p>sk8rmom,
I was using the current median loan balance for all borrowers, which is $20K, (offered in post #1), not the maximum Stafford amount, to come up with $230 per month.</p>
<p>Not sure why you are stunned by a presumption that those owing college loans are potential leaders/white-collar workers as opposed to the lower class. What data do you have that all of those in default are unemployed? I have not seen those figures. I did not presume that they were all employed. I posited that if they were employed, then they have the choice to pay back their loans or default. Even at minimum-wage rates, a monthly payment of $230 is doable, albeit painful.</p>
<p>Instead of paying $54K/yr for my son’s college (worth it, by the way), I should stick that money in my retirement fund or towards our mortgage. I should make him borrow the money so when they declare student loan forgiveness, we will have scammed the system and gotten his education for free.</p>
<p>when you say this is the tip of the iceberg? Do you mean you think many will refuse to repay or be unable to repay these loans? Are you seeing kids take on more and more, now? Or are they getting smarter about it then they were four or five years ago? </p>
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<p>My experience is that there are still many, many students borrowing more than they need to borrow. Many would be far better off beginning in a CC, which would reduce borrowing. Many borrow to live in the dorms, even though they are within commuting distance. Others go to colleges that cost more than they can afford when other four-year live-away options are more affordable. It’s the insistence that “I have to have that” that is a problem for so many.</p>
<p>KELSMOM, you are so on the money, no pun intended.</p>
<p>You could be talking about my own daughter, who has the idea that she can choose any college that will accept her, and take out whatever loan that is neccesary to make that happen. She believes its her choice, so she shouldn’t have to stay within the financial boundries I have set. We sent her to a private high school and it seems to have transformed her into an entitled brat that we swore we’d never allow her to become.We thought it was a very good school for her but all the elaborate sweet 16 parties with limos, brand new cars as gifts, has made her very shallow in her thinking. While she is a good student and works hard at a part time job, she has no clue about loans and what she would be getting into. Her guidance counselor is no help; telling her that she needs to stay on campus wherever she goes so she can have the full “college experience”. She would never consider a CC, and a state school would be a safety school only and will surely bring shame to her in the eyes of her classmates.
She has a lot of growing up to do. I refuse to co-sign any loans for her. I feel like I am saving her from herself. I tell her all the time she has to think about what she needs more than what she wants.</p>
<p>By the way, I am not suggesting that we let younger workers opt out of social security to apply to the loans, I am saying that they should be able to opt out, period. It’s time to quite forcing people to give up 7.5% or more of their income and not allowing them to use that money as they see fit, for their own retirement, to pay back student loans, buy a house, etc.</p>
<p>But the Social Security mess is another topic altogether!</p>