Student Loan Payment Suspension Extended To May 1, 2022

Paying for College
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None of this is cut and dry.

I work with people who say they can’t afford college, are in favor of free college, and yet have non-working spouses who are healthy and would earn more than enough money for child care (plus extra) if they worked outside of the house. IMO these colleagues should not get free college or get their loans eliminated. IMO the spouse needs to get back to work (unless there is a very compelling reason why they can’t). Choosing to stay home while your spouse works does not entitle you to free college.

I have no problem with young adults who take advantage of Public Service Loan Forgiveness programs, or similar programs that remove a portion of your loan for every year you put in. Certain Americorp type programs do this. IMO if you graduate college or grad school with some loans, nobody is stopping you from working in an inner city school, clinic, rural area, public hospital, or similar type job for a few years so that you get a break on your loans. You don’t HAVE to work in a cushy, wealthy suburb when you begin your career as a teacher, counselor, occupational therapist, etc. You don’t HAVE to work in a private facility in the middle of the wealthiest part of the city.

Do I think ordinary, middle class people should get their loans completely dismissed? In most cases, no.

Do I think many ordinary people should get some help paying off their loans? In many cases, yes. As I stated above, most people/families don’t have huge pots of money sitting around to pay for PT school, medical school, etc (even after attending their instate schools and saving since birth). These programs (PT etc) at the graduate level will cost a minimum of $100,000 …even at a state school. Medical school is much more. Our country needs these people, and I have no issue helping them…at least a little. It’s very nice to have parents who not only pay for undergrad, but also dish out $100,000 or much more to pay for grad school. Most don’t have that luxury. Most people graduate from healthcare grad programs saddled with huge loans. They should be helped…at least a little…IMO. Do we want a society where only the wealthy choose to become healthcare professionals? That being said, and I mentioned it earlier, these people will eventually earn enough to pay off their loans.

What about teachers who decide to go to Vanderbilt instead of taking the money to their state school? Do I think they should get their loans removed? No, I don’t. Do I think they should get some help? Again, I have no problem helping them if they choose to do City Year, Americorp, Teach for America etc. Many of these programs help pay off your loans, and I challenge anybody to work in these communities. Many would not last the year at these jobs.

If you choose Vandy, and then somehow get a teaching job in a wealthy suburb or fancy part of the city…then sorry. I don’t think you should get some relief on your loans. You need to buckle down, get some roommates, work out a budget, and pay your loans.

Do I have a problem with the government extending the pause of these loans by 3 months? No, I do not. I really don’t see what the issue is. It’s a pause, not a complete removal.

I have spent a big portion of my career working with poor families (not middle class). I have gone into homes where children don’t have toys, and where I sat on the floor in puddles of urine…working with kids (I brought wipes, gloves, garbage bags, and towels). I have entered homes where drug deals were going on outside, bullet holes in the windows, etc. I worked in hospitals where we gave out free subway tokens because these families had no money. I developed relationships with these families…they spent what little money they had buying me baby gifts. College, for these families, is not happening without some type of counseling, college assistance…help with applications etc…and free tuition. I have no problem with this free tuition and counseling, etc….so that these kids can be lifted out of poverty and dependence, and eventually become financially independent, tax paying citizens. Like I said…free college now (with intense guidance and counseling) will reduce the need for a lifetime of “free lunch.”

I mentioned the boy who attended school with my daughter. I have no doubt that his free tuition and help with R/B will lift him from the low income housing where he grew up, and where his family lives.

There are many shades of gray here, and it is rarely all nothing. It must be nice to never have to think about any of these issues.

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83

Well…there has been some help for one of my kids. As a Peace Corps volunteer, some portion of some student loan was cancelled for each year of service. It I don’t think Peace Corps is up and running yet…again.

As I stated above…my kid is paying on the principal of the student loan even with the pause allowed. It’s nice that all of what she has paid since this pause started is going towards the principal…and now until May.

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84

This is combining the two things I brought up into one and in no way comparable to what I said. They’re your words.

I think it’s helpful if we allow those (students only) who had to take loans get a break on repaying them to help equalize their start in adult life. I, personally, don’t want all loans forgiven, but since the average loan is around 26K, I believe, 10K would do wonders. It’s not those fortunate enough to be born into wealthy families who need debt, so I understand how they think it’s so unfair. I disagree.

Then I think as a country we need to do more to see that those in lower socio-economic classes have a decent opportunity to go to college without debt (or at least without high debt) because not doing so costs our country more money due to subsidies.

Working your way through college at our age was 100% different than trying to do so now even when one wants to go to a state school - the destination most of our college students choose because it’s the least expensive option for them.

https://www.americaspromise.org/news/pbs-newshour-biggest-predictor-college-success-family-income

"What’s the most important indicator of whether or not a student will graduate from college? According to Vice Provost David Laude at the University of Austin (UT), it isn’t how hard a student studies or how well they did in high school.

Instead, the most important indicator of whether or not a student will graduate from college is largely out of his or her control: household income."

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How would most people pay for grad school without these loans? Teachers, physical therapists, PAs, nurse practitioners, physicians etc….rely on these loan programs in order to pay for school.

Most families are not in a position to pay for grad school.

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Please. I’m doing an Americorps stint right now. What is stopping recent college grads from doing this is the money! I get about $1900/month (not even minimum wage of $15/hr in this city) as a stipend, a bus ticket, and not very good health insurance (I kept my own). I was offered several schools in the ‘inner city’ but couldn’t accept those assignments because the commute for me would have been more than 1 hour each way on top of the 40+ hours we are expected to put in. I’m old, retired, and don’t want to put in 50+ hour weeks as a volunteer! There are volunteers on food stamps (the stipend is taxable but not considered income for public benefits). If we complete 1200 hours (Aug-May), the we get 3/4 of a Pell grant as an educational award (to pay for college or pay back student loans) of about $4500; 900 hours (Oct-May) gets you $3000. They aren’t forgiving all student loans. The maximum educational stipend you can earn is 2 years of Pell grant or about $12.5k, and a max of 4 years to get that 2 years of time logged.

During normal times, student loans would be put into deferment status, but the interest would continue to accrue during that time. That loan balance could be growing a lot each month, and not helping the student in the long run.

Who can take jobs as lawyers, doctors, teachers in city or rural areas at a very reduced pay? Rich recent grads who can support themselves (or have parents willing to continue paying room and board) and may not even have student loans to repay. I can only do this because I have retirement income and a place to live. Most of the volunteers in my program are very young (some just out of high school) or retired people.

I could make more money working at Starbucks.

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Americorp is the umbrella. There are various programs that fall under this umbrella- some are good, others are not.

My daughter is currently doing a program under the “umbrella” of Americorp. She earns a nice salary, lives in an apartment in a major city, has free health insurance, and has managed to save a decent amount of money that she plans to put toward grad school. She works someplace where most would not last a year.

One needs to do their research before choosing these programs. FYI teachers and doctors etc can qualify for PSLF programs….and there are programs specifically geared toward grads who choose to work in rural areas, underrepresented communities etc.

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First, I’m not against student loans. I’m against people taking loans and then complaining about how it’s unfair that they have to repay them. Second, I don’t really care that payments have paused for another few months except that there’s no real reason to do it besides the political.

From the WP article: “Interest is unfair”? What universe are these students and parents living in? Contrary to the prevailing thought of the day, money is NOT “free”.

Certain occupations like PAs, physicians, nurses (although you can do nursing undergrad) will have salaries that support repayment. Film, social work, teaching….maybe not so much.

Bottom line: easy money from the government has and continues to create this problem. The schools know the students can 1. borrow large amounts of money to 2. fund graduate (and undergrad to a certain degree) degrees and 3. they’re absolutely willing to do it. Thus the schools have ZERO incentive to rein in the costs.

As far as taking on the debt, the initial question should be do you need the advanced degree? Many, if not most of the students in these articles are taking on 6 figure debt to obtain employment with jobs in the sub $45, 000 a year salary range. Does that make sense? Maybe if there’s a relatively sharp salary trajectory once they pass the entry level position. But it sounds like many of these jobs don’t fall into that category.

There was another thread on CC that dealt with the issue of creeping credentialism so I’m not going to rehash that subject to much here but it’s one that needs serious consideration and evaluation. Quick synopsis: If you’re going to pay $100,000+ for a masters in film, education or social work how does that degree translate as far as job and salary prospects? If your career prospects can’t support repayment of that loan does it make sense? Do most teachers need advanced degrees to be better teachers or are school districts incentivizing it because that’s how you make a higher salary, just not high enough to repay $100,000? Same with social workers. Can you learn what you need to know in undergrad to be a social worker? And I don’t even begin to understand why a masters in film is necessary.

I’m not against loans. I’m against the whining and complaining after you’ve used the money and are unhappy with the outcome and the expectation that other people should now pay that debt instead of the person who elected to take it in the first place.

Easy lending practices created the 2008 financial crisis and its creating the same with student loan debt.

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I agree that something needs to be done about costs, taking on huge debt when your salary will be $35,000 a year, etc.

Many states require teachers to get a masters degree, but you can go part time while teaching.

An MSW is an advanced degree. IMO if one wants to be a social worker, it is best to do undergrad at the lowest cost possible.

I thought you were against graduate school loans, but it seems you are not. Without loans…there would be few healthcare professionals. We can’t afford this as a country.

I am not in favor of eliminating student loan payments. I have no issue with reducing them…especially for healthcare providers. I also feel that low income families should have their loans reduced as well…$10,000 won’t matter to me, but it could make a world of difference to some.

I am also a big supporter of PSLF programs. These young people are doing jobs that many would not.

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A concern about the interest charged on government student loans is that it is a money making operation for the federal government. I find it interesting that private lenders (SoFi, etc.) can offer students drastically lower interest rates & still be quite profitable.

If student loans are not dischargeable in bankruptcy, then a reasonable argument can be made that government issued student loans should be issued at a preferred or prime rate.

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Not in my field. It required that I attend full time…and so I left my job and got my masters.

I did take post masters courses part time, but those had to wait until my kids were older and my spouse’s work schedule became more flexible. Between after school meetings, required evening school related things like conferences, and the like, it was no cake walk taking courses AND working full time as a public school educator. Unless you have done this…please don’t assume it’s so easy to do. It’s not.

For the record, I never took loans for grad school (followed the money for a fellowship), and I paid out of pocket for a lot of years for those post masters courses.

But I was fortunate to be working in a well paying district by then, and was at the top of the masters scale as well. It also helped that I was married to a high earner.

And of course, just as I finished my post masters courses…my older kid started college. At some point it seemed like paying for college was never going to end.

I absolutely feel loans should be repaid. I have no issue with this pause in payment/interest right now.

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Yep- my field too! The field REQUIRES a masters, and without graduate school loans I would not have been able to continue my education and move on to a successful career!

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This is one of the most common misconceptions out there, that somehow the government is raking in profits from student loans. In fact, there are consistently major losses because so many students default.

Here are two articles that describe the issue, one from 2016, and the other from 2021.

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Perhaps, but there’s still a higher likelihood of default which accounts for the higher interest rate. As the Forbes article posted states:

“Student loan default rates are higher for federal student loans because the federal government doesn’t underwrite student loans.

Unlike private lenders, for example, the federal government grants virtually every prospective borrower a student loan regardless of their underlying credit quality.

The rationale is that more students can have access to higher education. At the same time, this can lead to higher default rates.”

It’s the easy money problem exacerbated by no underlying collateral.

I imagine the private lenders can charge slightly lower interest because they do underwrite the loans which helps prevent unqualified borrowers taking on 6 figure loans.

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If you are a teacher at the NYC DOE, you must complete your masters within your first 5 years in order to keep your job. 30 credits over your masters is a salary bump (some people use these 30 credits to get building leader/district leader certification.

school counselors and school social workers must have masters for initial certification. you must get additional credits for a salary bump.

Unless you come in as a teacher through Teach for America, NYC teaching fellows, Men Teach, or a few underserved bilingual programs at the DOE the cost of your grad degree is on you

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Yes, exactly. You need your masters within 5 years to work in the entire state of NY- not just NYC.

A salary bump can also happen in NYC if you have extra credits in your teaching area during undergrad. For example…if you enter through one of the alternate route programs that you mentioned, and you entered as a biology major…you will get credit for extra biology credits that you completed in college ( I know people who started with a BS+15 or more right out of college). You would enter as a BS+. Same for a masters- you get an increase for extra credits within the masters. A 30 credit masters is treated differently than a 45 credit masters.

The DOE has courses that you could sign up for that are very reasonably priced (I think you can get reimbursed but not entirely sure) and that get applied toward the salary bump.

If you enter through one of the alternate route programs then you need to get your masters right away, and complete it within 2 years. It should be funded, however (mostly funded).

You have to “apply” for your salary- it isn’t automatically given to you (but it is retroactive).

The NYC DOE is a pretty good employer, IF you enjoy it (BIG IF). Free health insurance, a pension, opportunities to make extra money through all kinds of clubs and after-school tutoring, salary bumps, nice summer school income, etc. You can make close to a six figure salary while still in your 20’s….as a teacher.

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Maybe the default rate is high due to increased debt as a result of the high interest rates ?

There are government officials who refuse to cancel student loan debt without a corresponding cut in expenses to offset the income from the student loan programs.

The student loan program was designed to be a money maker for the federal government, but recent forgiveness due to fraudulent claims by “for-profit” schools and forgiveness of that debt affected profitability as do suspensions of interest accrual and income based repayment plans.

Unfortunately, the issue as to whether or not the federal student loan program makes or loses money can be argued both ways and is argued both ways depending upon one’s agenda.

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Student loan interest rates are not high. It is an unsecured loan and the same loan on the private market would be 18%? 20%? More likely the student could not qualify.

What’s the interest rate on your credit card? I have a card through my credit union that I’ve had for 40 years. I think the rate is 8% and that’s the best available. Most of my cards are at 15% or higher (Macy’s, Chase). I don’t carry a balance so I don’t really know.

My daughter is a grad student and we get SoFi offers in the mail. I think the rate is 7.5% IF she can qualify, if she sets up auto pay, if she gets A’s in school. The 2% rates you see are teaser rates for AFTER you’ve paid quite a bit of your balance or secure a job at $100k per year.

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CC debt & interest are dischargeable which makes them a much higher risk than student loans which are non-dischargeable debt.

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People argue about many topics, including the following:

  1. Is climate change real?
  2. Are covid vaccines effective?
  3. Do federally subsidized student loan programs consistently lose money?

Just because people argue about something doesn’t mean that there isn’t a right answer. And for all three of the above, the right answer is “yes”.

It is important to understand that people get all three wrong for the same reasons: Some people benefit either financially or politically by convincing others of incorrect information.

I am not blaming you for getting the student loan part wrong, as that’s not your field of expertise. To me, as a financial quant, it was immediately obvious that when about 15% of student loans are delinquent, you can’t make profits with an interest rate that is currently at 4% or less.

The reason why the myth of “student loans are profitable” is because of the extremely optimistic projections of repayment. In simple terms, the optimistic projections allow showing a profit, whereas the losses get written off later when it becomes clear that repayment is actually much lower. If a company tried doing the same kind of accounting games that the government does with student loans, the SEC would be all over them.

If you would like to read a non-partisan view about this, the following provides a useful primer:

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The requirement to assign the same interest rate to all borrowers regardless of their credit worthiness juxtaposed against the congressional responsibility to set the rate at a level that makes higher education accessible (and politically popular) ensures a lack of stand alone commercial viability.

Think of any bank that had to lend to any and all customers who walked through the door at the same rate regardless of credit history and future earnings. That would only be viable if the interest rate of the most worthy was set artificially high to offset the inherent and predictable risk and loss of the least worthy. In the case of federal student loans the rate is set by congress and is not bound by commercial feasibility but by a desired societal good.

The ability to price appropriate to credit risk adjustment is why private student loan lenders are profitable. They can choose to not lend to those at greater risk, charge a marginally lesser worthy but whom are likely to be able to repay and underwrite to a profit those who display greater credit worthiness.

Big difference between a commercial enterprise that is held accountable to share holders versus the government whose losses are absorbed by the tax payer.

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