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 Post subject: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 11:52 am 
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Student Debt Crisis

This is the best article I have read on just why there is such a problem with student debt and gives some very good, practicable ideas on how solve this problem.

Quote:
There are two parts to this dilemma. First, the laws must be changed to stop this from continuing. Second, address existing borrowers who cannot repay their loans.


Some ideas from the article:

1. Every young person does not need to get a college degree, encourage young people into trade schools which are much cheaper

2. Teach money management to high school students

3. Make "investment loans" - money paid back is invested and lowers the overall loan amount for the student

4. Make student loans "dischargeable in bankruptcy" - that is if a person goes backrupt, student loans are treated like car loans, credit card debt; lenders will be more cautious about who they make loans to."

There are several other good suggestions in the article, I only listed a few of them.

I posted the link to this article not to get into a political discussion but because I did not know much about this problem and haven't heard such good remedies. If you must make a political comment, quote this post and please put your topic in the Study.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 12:27 pm 
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There is another side to this issue. Why does it cost over $100,000 to get a college education nowadays ? I spent around $2500 to get my 4 year degree in the early 80's, which included tuition and books. It seems to me that colleges are gouging students and forcing those who do not have rich parents to leave with enormous debt.

I would agree that not everyone should or needs to go to college, but for those wanting to attain higher education, it should be affordable.

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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 12:37 pm 
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The Fed needs to get out of the loan business and have banks do it. The banks will not take on poor risks - so people who are a bad risk will not be able to get huge loans and then not be able to pay them back.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 1:03 pm 
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wxgeek wrote:
There is another side to this issue. Why does it cost over $100,000 to get a college education nowadays ? I spent around $2500 to get my 4 year degree in the early 80's, which included tuition and books. It seems to me that colleges are gouging students and forcing those who do not have rich parents to leave with enormous debt.

The article addressed this wxgeek:

Quote:
If student loan debt becomes dischargeable, lenders will be more cautious about who they make loans to. They won’t give loans to people with bad credit history or who plan on majoring in fields that don’t pay enough to repay the loans. It will also stop colleges from constantly increasing tuition, since lenders will no longer approve as much in student loans.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 1:12 pm 
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TillerBee wrote:
wxgeek wrote:
There is another side to this issue. Why does it cost over $100,000 to get a college education nowadays ? I spent around $2500 to get my 4 year degree in the early 80's, which included tuition and books. It seems to me that colleges are gouging students and forcing those who do not have rich parents to leave with enormous debt.

The article addressed this wxgeek:

Quote:
If student loan debt becomes dischargeable, lenders will be more cautious about who they make loans to. They won’t give loans to people with bad credit history or who plan on majoring in fields that don’t pay enough to repay the loans. It will also stop colleges from constantly increasing tuition, since lenders will no longer approve as much in student loans.


The government guarantees student loans - so the above quote does not follow - this is part of the problem - the banks do not care about the ability to pay the loan back.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 1:19 pm 
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My experience with my daughter was that her initial loans for her undergraduate degree were made before Obama's administration had the Feds take over student loans. Her initial loans were in the 3-5% interest range. Her later loans, after the Fed takeover, were in the 6-8% range. How did that takeover help us any? She has since financed a Masters degree, without our help, and those rates are still in the 6-8% range. The repayment requirements, as originally presented to her, were impossible for a new graduate to make. They worked with her, based on the job and salary she accepted, but all that did was push the final due dates out for several more years and increase the interest that will be paid. As it is, the program does allow forgiveness of remaining amount due after 20 years if certain conditions are maintained. So she will be in her 50s before she is out from under these loans and we, the taxpayer, will be picking up some of the total amount. There has to be a better approach. The universities are always hounding their alumni for donations but many get state and federal funding also and have enormous endowment funds they have built up over the years.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 1:36 pm 
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A couple other thoughts that may be spinoffs from this article.

Make loans contingent on maintaining a certain GPA from year to year, so we know that students are making appropriate progress with their education. I’d love to know the percentage of student borrowers who take loans and then don’t complete their degrees.

Encourage work study programs. Back when I was in college, mid 70s, work study was a requirement if you got a scholarship and a loan. Some were dining hall jobs and others were more like paid internships. I cleaned house for the president of MIT on the side. By my senior year I had 3 research assistantships and was making sandwiches at Au Bon Pain. I graduated with $1500 in debt, payable at $30 per month. If kids had more opportunities for work study while in school, they might not need so much in loans.

Make loans very low interest or interest free. (Yep the banks will love this, ha ha as that’s where they make money...) But it might be a way of reducing supply of easy money.

I agree that we have a huge problem. Many young people have so much debt that they are delaying forming families and buying homes. That has to be a drag on the economy.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 1:50 pm 
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I will address the why -

Quote:
The Cloward–Piven strategy is a political strategy outlined in 1966 by American sociologists and political activists Richard Cloward and Frances Fox Piven that called for overloading the U.S. public welfare system in order to precipitate a crisis that would lead to a replacement of the welfare system with a socialist system of "a guaranteed annual income and thus an end to poverty".

https://en.wikipedia.org/wiki/Cloward%E2%80%93Piven_strategy

In this case, creating a student loan crisis that would lead to free higher education funded by government.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 3:29 pm 
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daisypusher wrote:
The government guarantees student loans - so the above quote does not follow - this is part of the problem - the banks do not care about the ability to pay the loan back.

Well no. The federal loans are called "guaranteed student loans" but are not from banks but from the federal government. Banks are no longer part of the federal student loan program:

Guaranteed Student Loans

Quote:
In 2010 the Federal Family Education Loan Program was discontinued, with all new loans being administered under the Direct Student Loan Program. All guaranteed student loans are now processed, and disbursed, directly through the U. S. Department of Education.


The webpage lists 4 types of federal loans (actually a 5th loan type is "Federal Direct Consolidation Loans"). I am not sure why the loans are called "guaranteed" as all the money comes from the federal coffers.

Quote:
State Supported Student Loans and Loan Forgiveness Programs

With the cancellation of the Federal Family education Loan Program, states were forced to assume responsibility for their own student loan programs. Every state in the country has its own Department of Higher Education, which offers a wide selection of grants and scholarships for its resident students. Many states also sponsor loans, and loan forgiveness programs, through their Department of Higher Education.

Some states do make their loans through banks.

Here’s what happens if you default on your student loans—and how to get back on track

Quote:
When a loan defaults, it dramatically damages your credit, affecting your ability to purchase a car or put a down payment on an home.
...
Also, after default, you also lose eligibility for deferment, forbearance and loan forgiveness, as well as other benefits, like choosing your own repayment plan and eligibility for additional federal aid.

Your school could also withhold your academic transcript, and you could lose the ability to purchase or sell assets such as real estate.

The "dischargeable in bankruptcy" not being available to the federal student loans is one of the reasons why these loans are do bad - a student cannot get out of the loan even during bankruptcy.

dgwhite wrote:
As it is, the program does allow forgiveness of remaining amount due after 20 years if certain conditions are maintained. So she will be in her 50s before she is out from under these loans

This is terrible for her! I would hate to have a loan that takes that long to pay off - the interest paid would probably be more than the original loan.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 6:34 pm 
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Every product that is paid for or subsidized by the government is artificially higher in price - thus negating the aid in the first place. There should be NO government loans - only private ones made by banks that are dischargable in bankruptcy. This doesn't mean there can still not be scholarships and the like and some aid but NO loans.
You'd see the price of college drop 80%. When I went to school tuition was $1000. Taking in account inflation - the price now should maybe be $4,000. Instead it is $20,000 plus.

The same effect is seen in the prices of medical care and housing which are also partially subsidized.


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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 10:24 pm 
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I always see this conversation revolve around repaying the loan. I see the root cause as the out of control schools charging way too much for an education and getting away it.

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 Post subject: Re: Student Loan Crisis - Why and Solutions
Post Posted: Jun 4, 2019 11:06 pm 
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The more the government is involved the more expensive things get!


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