Do we need a student loan bailout?

[oyarde]

No.

Well done .

 

[Cowlesy]

I borrowed money to attend college and I plan on paying every penny back. I signed the Master Promissory Note and I was aware of what a loan is when I entered college. If a parent or student can't comprehend the definition of what a loan is then they should not go to college. I work in financial aid so I see the back end of the disaster brewing.

What!?!?! When, all of a sudden, did having personal responsibility for using credit you signed for re-surface on this forum??

 

[gwax23]

I hope this is a joke.

If you where stupid enough to sign up for some ridiculous 100k plus loan to get a worthless degree and now your unemployed/underemployed and want the productive members of society who werent stupid enough to sign off on some ridiculous loan, to pay for your mistakes?

Im working 2 part time jobs to save and work through Community college than a 4 year school. I have not taken out even one loan. But now im gonna have to be saddled with more taxes or inflation when I graduate because the government decided to bail out all the idiots at my and others expense.

No absolutely not.

They need to come out of their little college bubble and into the real world where their actions and choices have consequences and where their exists a concept called RESPONSIBILITY. That and the economic consequences of simply writing off this huge amount of debt would be catastrophic.

 

[CT4Liberty]

Oh theres a problem with people making bad financial decisions...

I know the solution....

Also - lets be honest with ourselves. I'm going to assume Jordan has the best intentions in mind here (I hope) and that he wants to help all the poor college kids up to their eyeballs in student loan debt and a crappy job (if they are lucky) that could never afford to pay it off if they worked till they were dead...

But lets not kid ourselves, any student loan "bailout" would be to the institutions that issued the loans, much like the housing "bailout". Folks suffering and struggling to pay continue to get screwed while the politically connected big business gets to suck even more money out of the suckers in the form of tax dollars to make sure their golden parachutes are secure...

Stop the madness and just end the bailouts, all of them. If a cause is so dire and just then set up a charity and people will contribute.

 

[pacelli]

Taking out over 100K in student loans from undergrad through doctorate, to get letters after my name was my choice. I wouldn't take a bailout even if it were offered to me. I read all the fine print and knew that I would be paying them off until.... they were paid off.

 

[KingNothing]

Millions of students signed their lives away at the depth of the recession. They took out more student loans than they could ever afford to repay. Many of these student loans are backstopped by government, meaning that the government will pay for any balances that students cannot repay in the future.

So why not bail out student loans now?

If the government is going to bail people out anyway, doesn't it make more sense to do it now? Bailing out students would help boost aggregate demand and stimulate consumption, improve consumer spending, and get the economy out of its current slump. If the end result is bailouts, why not today?

Horrific idea. Why not just allow kids to declare bankruptcy?

 

[FSP-Rebel]

Thank you.

Don't borrow money if you don't want to pay it back. How hard is that? No one held a gun to anyone's head. It's no one's fault but your own if you went into massive debt getting a worthless degree in something like Art History, something you could not get a good enough paying job in which to justify obtaining the degree in the first place.

Let me start out by saying I don't favor a bailout. But, these young people are being used as pawns to prop up the collegiate academia throughout the country and they are bred from middle school thru high school that college is the way to go otherwise you're gonna be a dud or burnout and will make $1mill less during your life than those who graduate from college. Plus, parents have their own expectations of their kids and it's much better for them in their circle of friends to say that so and so is going to college and/or graduated from college than the youngster just works at fill in the blank. Even if the person can't find a job in their field of study, it's better for the parent to be able to say that their kid graduated from college it's just that the economy is fucked and that's the deal which others can understand, same if the kid lives back at the parents house. The bottom line is, kids are propagandized all their lives about going to college all the while the entire deck is stacked against it (from academia, voters that allowed their reps and prez to federalize student loans, and parents). So, to say that no one put a gun to their head to sign the loan is one thing but morally the responsibility can be spread around.

 

[heavenlyboy34]

I agree with previous posters who talked about lots of blame to go around. Tremendous moral hazard has been created by the FedGov in recent decades. Because of the ADA and various anti-discrimination laws, employers can no longer simply test for intelligence/competence. It's easier to just require a degree. That forces people into college who would otherwise not attend. Then there's the incredibly low standards in education given to us from the DoE. Stuff that used to be standard knowledge for high school grads now have to be taught in uni. (these are a few reasons for the popularity of "junk" degrees too, btw) Then there's bankruptcy laws which don't allow student loans to be dismissed in bankruptcy. Then there's the ridiculously lax loan industry. Any dumbass who wants to go to college for 4+ years can get "free" money with no collateral. These lax requirements also cause degree inflation. That inflation forces people who already have overpriced undergrad degrees to get overpriced graduate degrees. So much madness all around that it's hard to blame any single person or group. :/

 

[Jordan]

So how much do you owe?

$0.

 

[jclay2]

Horrific idea. Why not just allow kids to declare bankruptcy?

this.

 

[Zippyjuan]

Student loans cannot be excused via bankruptcy with limited exceptions.

http://www.finaid.org/questions/bankruptcyexception.phtml

The US Bankruptcy Code at 11 USC 523(a)(8) provides an exception to bankruptcy discharge for education loans. This page provides a history of the legislative language in this section of the US Bankruptcy Code.

Student loans were dischargeable in bankruptcy prior to 1976. With the introduction of the US Bankruptcy Code (11 USC 101 et seq) in 1978, the ability to discharge education loans was limited. Subsequent changes in the law have further narrowed the dischargeability of education debt.

The exception to discharge for private student loans evolved over time. Prior to 1984, only private student loans made by a "nonprofit institution of higher education" were excepted from discharge. This was intended to protect the National Defense Student Loan Program (NDSL), the predecessor to the Perkins Loan Program. Those loans were made by colleges using a revolving loan fund created using matching federal contributions. The Bankruptcy Amendments and Federal Judgeship Act of 1984 made private student loans from all nonprofit lenders excepted from discharge, not just colleges, by striking the words "of higher education". The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 expanded this to include all "qualified education loans", regardless of whether a nonprofit institution was involved in making the loans.

More info at link.

 

[oyarde]

Zippy is correct , it is like owing the IRS or child support you cannot escape.

 

[jmdrake]

Zippy is correct , it is like owing the IRS or child support you cannot escape.

Actually you can.

http://studentloanhelp.org/blog/obama-student-loan-forgiveness/

Basically if you have sucky income you can have your payments lowered and then after 20 years the debt is discharged.

 

[heavenlyboy34]

Well....Obama already set up a student loan bailout. There's a program where you can make your loan payments proportional to your income, and after so many years it's "wiped out" regardless of whether you pay.

What if the "income" is $0? Plenty of people out there with all sorts of fancy degrees and vast debt living in their parents' houses or their cars or cheap apartments and collecting food stamps/disability/unemployment. (Unemployment beneys last some 4 months now, don't they?)

 

[jmdrake]

What if the "income" is $0? Plenty of people out there with all sorts of fancy degrees and vast debt living in their parents' houses or their cars or cheap apartments and collecting food stamps/disability/unemployment. (Unemployment beneys last some 4 months now, don't they?)

Well....I guess if it's zero for 20 years the debts' discharged. But that would really suck.

 

[Zippyjuan]

Probably not something you would want to deliberately do. That means low income for everything else too (assuming you had a choice of income levels and chose the lower one on the basis of having student loans).

■Lower Payments: Eligible borrowers can have their monthly student loan payments capped at 10% of their discretionary income. To get an idea of what a difference this can make, a borrower with $40,000 in student loan debt at 6.8% APR who makes $50,000 a year would pay about $460 monthly on a standard repayment plan. That same borrower would pay approximately $277 on Pay As You Earn. Compared to other federal repayment plans, Pay As You Earn offers borrowers one of the lowest possible payments.

■Student Loan Forgiveness: If a borrower makes consecutive, on-time payments for 20 years, any remaining balance will be forgiven. However, borrowers may need to pay taxes on the forgiven balance.

■Not everyone will qualify: What does it take to qualify? Only new borrowers with Federal Direct Loans will qualify. If you took out a federal loan prior to Oct 1, 2007, you are not considered a new borrower. Also, you must have received a Direct loan after Oct 1, 2011. If you’re not sure when you took out your loans, or if your loans are Direct, you can find out by visiting the National Student Loan Data System (NSLDS). Also, if your student loan defaults, you won’t qualify for Pay As You Earn, so if you’re struggling with your payments you should reach out to your loan servicer right away.

■Total Interest: Since borrowers are making lower payments, the loan will typically take longer to pay off. As a result, borrowers will end up paying more interest on Pay As You Earn than on a standard repayment plan.

Let's run their numbers. $277 a month on the "low payments" plan. That is $3324 a year. Times 20 years is $66,480 on a 20 year pay and quit program for a $50,000 loan. You can then bail on what is left.

 

[heavenlyboy34]

Actually you can.

http://studentloanhelp.org/blog/obama-student-loan-forgiveness/

Basically if you have sucky income you can have your payments lowered and then after 20 years the debt is discharged.

Seems like a redundant program at first read. As it is, my payments have dropped significantly after I began paying them back a few years ago. Sallie Mae used to be ~$122/month, and Direct Loans was $116.24/month. Now, Sallie Mae only bills me $60.96 and Mohela (formerly Direct Loans) lets me pay as much/as little as I want. (I stick with the original $116.24/month though, hoping to get the balance paid off ASAP)

 

[Zippyjuan]

Seems like a redundant program at first read. As it is, my payments have dropped significantly after I began paying them back a few years ago. Sallie Mae used to be ~$122/month, and Direct Loans was $116.24/month. Now, Sallie Mae only bills me $60.96 and Mohela (formerly Direct Loans) lets me pay as much/as little as I want. (I stick with the original $116.24/month though, hoping to get the balance paid off ASAP)

Just rember that with lower payments, the interest is piling up faster. Good that you are keeping up at the same rate.

 

[oyarde]

Probably not something you would want to deliberately do. That means low income for everything else too (assuming you had a choice of income levels and chose the lower one on the basis of having student loans).



Let's run their numbers. $277 a month on the "low payments" plan. That is $3324 a year. Times 20 years is $66,480 on a 20 year pay and quit program for a $50,000 loan. You can then bail on what is left.

Ouch, then you owe the Irs tax on the" forgiven " ? Holy hell, most people in that income area would be getting a little tax money back , so they snag that and what you owe for no health insurance?

 

[Zippyjuan]

They seem to be treating it as income- as if they actually gave you the money and you used it to pay off the balance on your loan.