It isn't just high tuition that creates this problem. It's the high interest rate and capitation of the loan balance. The amount of monthly payments I have with the reduced payment amount (10% of the balance) is lower than just the compounded interest to maintain the loan. So the interest amount is added month after month via capitation. The opposite of a retirement plan. I just get deeper and deeper in debt! I think Congress should pass legislation forgiving all the student loan interest from the time of the loan. My loan amount would be the original amount. Lowering or eliminating interest and making capitaton illegal would go a long way I'm helping fix the problem. If my debt amount could go back to the original amount I could manage to pay it. This needs to be explained to student loan holders. I bet if a presidential candidate were to pledge to do this, she/he would surely be elected!
12
The academic institutions are complicit to an extent that they have not acknowledged.
Since in order to survive and expand they need students--students with wherewithal--they encourage their financial officers to push students to take out loans without regard for the potential for any payback.
Perhaps the institutions rather than the taxpayers should be the guarantors.
Since in order to survive and expand they need students--students with wherewithal--they encourage their financial officers to push students to take out loans without regard for the potential for any payback.
Perhaps the institutions rather than the taxpayers should be the guarantors.
7
This is the next American-made financial crisis and it is grim indeed to learn how we've been making it worse. (Though it does seem sadly predictable, given the financial-services industry's history of impeccable behavior.) Borrowing for many people of modest means is a insidious trap and concealing or obscuring this escape hatch -- whether through incompetence, ignorance or simple greed -- is negligent if not downright criminal.
We need to watch these folks like a hawk and take steps to assist those borrowers cheated of a less-onerous path.
That said, borrowers in this country need to absorb a basic lesson: Live within your means and don't take on debts you're ill-equipped to repay.
We need to watch these folks like a hawk and take steps to assist those borrowers cheated of a less-onerous path.
That said, borrowers in this country need to absorb a basic lesson: Live within your means and don't take on debts you're ill-equipped to repay.
7
Well, back in my repayment days Fanny and Sally called me every month to harass me with unreasonable demands even though I was up to date with my payments. I finally complained to the Pennsylvania authorities about it. A month later an investigator was passing through my city, we met and she told me that her agency had thousands of complaints against those two Samaritans but they ignored everything because their connections to the Federal government were stronger than the law. Would anyone expect such companies to inform you about your options? I suggest a student should have a lawyer, maybe file for bankruptcy. These two are much alike the credit bureaus, above the law.
3
Here's the main reason "student debtors go unrescued"-- most young people don't vote. In 2014, 10 million of them made it to the polls:a youth turnout rate of 21.5%, a typical midterm rate for that group. See: http://www.civicyouth.org/21-3-youth-turnout-preliminary-estimate-compar...
We have a Congress packed to the gills with people who don't see students racking up preposterous debts they are later unable to pay as an issue important to their reelection. If the youth vote started showing up for midterms at 60% or even more, that would change.
We have a Congress packed to the gills with people who don't see students racking up preposterous debts they are later unable to pay as an issue important to their reelection. If the youth vote started showing up for midterms at 60% or even more, that would change.
17
For the last eight years the banks have been borrowing TAXPAYER money from the Federal Reserve at less than 1%. The government through banking institutions and loan servicing companies have been making student loans at 7% or higher. There have been several attempts to enact legislation to lower the borrowing rate to align it with prevailing market rates. These have been defeated with the lame excuse that the interest earned on these loans would reduce government income and increase the budget deficit. Given this logic why don't we issue entitlements (except those pre-purchased such as Social Security) as interest bearing loans that can never be forgiven?
5
Why assume they need to be "rescued" from a contract they knowingly signed?
Also - how about making the college put some skin in the game? Don't let colleges take the money and run, why not build in some risk sharing...
....sell "educational partnerships" in which the college has to pay parts of the loan a student can't earn enough to pay?
How about helping them both make rational decisions before committing a huge part of a student's life's income to a risky investment like a college education?
PS - I have taught in colleges all my life. I know how the sausage is made.
Also - how about making the college put some skin in the game? Don't let colleges take the money and run, why not build in some risk sharing...
....sell "educational partnerships" in which the college has to pay parts of the loan a student can't earn enough to pay?
How about helping them both make rational decisions before committing a huge part of a student's life's income to a risky investment like a college education?
PS - I have taught in colleges all my life. I know how the sausage is made.
13
Hallelujah!! Finally someone is going to bat for the post-grads who are trying to navigate life while attempting to pay back thousands of dollars of student loans! This article was very helpful because I'm a recent graduate and will have to start repaying my student loans soon. This article helped me to feel less terrified of that!
6
How many of the "victims" borrowed money and paid it back as and when they agreed?
5
The main issue is the usurious interest rates. Public higher ed in the rest of the western democracies is 25-35% of the cost of public higher ed in the U.S., and when their students need to borrow the relatively small sums necessary, their governments (societies) only charge the minimal interest necessary to process the loans, not to make over-the-top profits.
16
History will someday record that, in this crazy era, the United States turned into a country that literally hates its children. How so? By expecting them to somehow predict an unpredictable job market and be saddled with lifetime debt - without even the availability of bankruptcy protection - for guessing wrong. That's assuming, of course, that they've already survived the school-to-prison pipeline and somehow escaped cybersmear in the ONE so-called developed nation that resolutely refuses to provide any online privacy protections whatsoever. Is this what we wish for our offspring - life on a tightrope, surrounded by sharks and alligators?
And then again, even those who 'survive' (If you call this 'living') and get a relatively high-paying job are basically ordered to work such long hours that they can't even HAVE families unless they're amongst the few who can afford full-time child care. This is not an economy, dear readers. It is insanity verging on national suicide.
And then again, even those who 'survive' (If you call this 'living') and get a relatively high-paying job are basically ordered to work such long hours that they can't even HAVE families unless they're amongst the few who can afford full-time child care. This is not an economy, dear readers. It is insanity verging on national suicide.
22
I strongly believe that within the next 15 years we will see how bad the situation is when these borrowers can not qualify for mortgages or simply don't want a mortgage in addition to their high student loan repayment. I'm hearing my law school friends already choosing rent over ownership, and when this occurs, it will hit our economy with a one big punch in the face as constructions comes to a grinding halt again. We need to rebuild this failed system and make the debt manageable. You heard it hear first!
14
I blame the colleges for this problem. Check tuition rate from 15 years ago. Only heavily machined items and prescription drugs have increased faster in price. Any liberal-dominated enterprise never takes appropriate care of funds, and colleges have been liberal statist ghettoes since the Vietnam War days.
Fix that problem and you start fixing these loans.
Fix that problem and you start fixing these loans.
4
If you look at the leadership, including the governing boards, of most public universities over the past couple of decades when costs have increased substantially beyond general inflation, you will find that the dominant political persuasion of the individuals in charge is actually Republican.
16
I'm waiting for a conservative ideologue to write a comment insisting that current government regulation of student loan lenders is to blame for all the problems described in the editorial, and that adding more government regulation would make things much worse for debtors. The commenter would then go on to explain exactly how removing the burden of regulation and letting banks regulate themselves would allow the Free Market to optimize the funding of higher education.
6
It took me YEARS while paying off my Grad School loan to finally get the loan service company to admit that if I sent a simple fax I could pay more principal than invoiced. When I paid more they just put it towards the next payment (paid ahead status) and NEVER let me get further ahead than they wanted me to. They wanted me to pay this loan back over 28 years! I did so in 12, ONLY because I hounded the customer service center until someone finally fessed up: send a fax asking to be taken off the "paid ahead status". I did so. But it took YEARS for this information to be made available to me. DISGUSTING.
78
These companies don't make it difficult to refinance - they make it impossible. They simply refuse to accept partial payment, to lower payments in times of lower salaries or unemployment, or to adjust payments in times of medical crisis! They refuse to do anything except put the loan into "forbearance" - meaning the modest amounts borrowed can skyrocket. It isn't "students" who are being hurt, it's large swathes of middle-class Americans who never ever borrowed from these companies - but whose loans were sold to them and who are now effectively indentured servants who can never pay their way out of debt.
11
The price of tuition and books and incidentals is WAY TOO HIGH. Students do not get their money's worth for their education. Reduce tuition 75% and you'll get my attention. No student should have $100,000 or more in student loan debt strapped to their back. It's just wrong.
5
The debt industry in the US is full of unprosecuted thieves.
During the mortgage melt-down, the most defaults and foreclosures occurred in Nevada and Florida, where incidentally, the highest number of persons with criminal records were writing mortgages.
Homeowners, lost their homes, the payments they had made, their credit was destroyed, while banks took a tax deduction on the foreclosed homes for which "free money" at near 0% from the taxpayer funded US Federal Reserve had been loaned out at escalating, excessive rates.
Why does our system allow money lenders to engage in RICO level fraud and scams.
The second round of financial scams after the mortgage meltdown is shaking out now in consumer debt and student loans.
And DOJ does nothing. Even amongst pay day lenders who charge hundreds of percent interest, or predatory lenders who destroy the finances of targeted service members and others.
The money lenders can possibly take down our system or what's left of it.
The damage to millions of people's lives in incalculable.
Who will stop this.
Congress does nothing.
The big banks slammed borrowers, locking in accelerated rates on credit cards in front of Dodd Frank.
Congress did nothing.
We effectively subsidize the big banks, with free money from the Federal Reserve, paid for with the interest on US Securities, to say nothing of the TARP, mostly not repaid, and the tax deductions banks take for their "losses."
UGH!
During the mortgage melt-down, the most defaults and foreclosures occurred in Nevada and Florida, where incidentally, the highest number of persons with criminal records were writing mortgages.
Homeowners, lost their homes, the payments they had made, their credit was destroyed, while banks took a tax deduction on the foreclosed homes for which "free money" at near 0% from the taxpayer funded US Federal Reserve had been loaned out at escalating, excessive rates.
Why does our system allow money lenders to engage in RICO level fraud and scams.
The second round of financial scams after the mortgage meltdown is shaking out now in consumer debt and student loans.
And DOJ does nothing. Even amongst pay day lenders who charge hundreds of percent interest, or predatory lenders who destroy the finances of targeted service members and others.
The money lenders can possibly take down our system or what's left of it.
The damage to millions of people's lives in incalculable.
Who will stop this.
Congress does nothing.
The big banks slammed borrowers, locking in accelerated rates on credit cards in front of Dodd Frank.
Congress did nothing.
We effectively subsidize the big banks, with free money from the Federal Reserve, paid for with the interest on US Securities, to say nothing of the TARP, mostly not repaid, and the tax deductions banks take for their "losses."
UGH!
12
We are currently in an embarrassingly deplorable state of affairs when it comes to supporting ways for more people to have access to higher education. My wife is a director of college admissions and it really upsets me to hear every year how much debt an average student will have to take on and how long it will follow them into adulthood and beyond.
My wife and I both hold a Masters degree and are gainfully employed; we've been out of school for a decade and just last year finally paid off all of her remaining student debt...and we consider ourselves lucky.
The current state of Student Loan Debt is a major issue that I hope will be tackled in the upcoming 2016 election in a meaningful way, and not just be a talking point.
My wife and I both hold a Masters degree and are gainfully employed; we've been out of school for a decade and just last year finally paid off all of her remaining student debt...and we consider ourselves lucky.
The current state of Student Loan Debt is a major issue that I hope will be tackled in the upcoming 2016 election in a meaningful way, and not just be a talking point.
14
Another wonderful example of unchecked capitalism at work. The failure of the government to do its job and rein these highway robbers in does not prove the incapacity of the state to cope with economic problems. It demonstrates that a government under the influence of the industry it is supposed to regulate will behave as a co-conspirator.
The new Consumer Financial Protection Bureau now has an opportunity to show what a government determined to protect its citizens can do. Or it will, if the Republicans, always anxious to defend us against helpful public agencies, doesn't destroy or gut it first. It never ceases to amaze me that these banksters and their minions in Congress are able to fashion a self-image that doesn't resemble the portrait of Dorian Grey.
The new Consumer Financial Protection Bureau now has an opportunity to show what a government determined to protect its citizens can do. Or it will, if the Republicans, always anxious to defend us against helpful public agencies, doesn't destroy or gut it first. It never ceases to amaze me that these banksters and their minions in Congress are able to fashion a self-image that doesn't resemble the portrait of Dorian Grey.
10
Unlike most modern industrial countries, like many of the ones that out-compete the US for business in a number of areas, the burden of education financing falls heavily on students.
We hear corporations often complain they can't find enough skilled workers, particularly in tech areas, but many other fields as well. My own doctor speaks with an accent, as people often complain about our medical system, but is an excellent practitioner. Whether he came from abroad like many in medicine do, I don't know, but the fact that US medical schools don't produce enough graduates to serve an aging population is worrisome.
Might there just be a connection between the scandalously bad student loan(shark) business and these other issues? I think so.
Furthermore, college is supposed to present the opportunity to better oneself. For many students, they end up bettering their financier's bottom line for decades before they start contributing more generally to the economy by spending that hard-earned cash in the community.
People note the trend to gilt-edged campus facilities, because its cost mostly gets rolled into ever bigger student debts.
Americans should wise up and demand better. Just holding student loan(sharks) to the same still low standards as credit card companies would be a good first step. It's dumb public policy in general to make the cost of not being dumb so high for qualified students. Lack of public financing costs our nation and puts us at a competitive disadvantage.
We hear corporations often complain they can't find enough skilled workers, particularly in tech areas, but many other fields as well. My own doctor speaks with an accent, as people often complain about our medical system, but is an excellent practitioner. Whether he came from abroad like many in medicine do, I don't know, but the fact that US medical schools don't produce enough graduates to serve an aging population is worrisome.
Might there just be a connection between the scandalously bad student loan(shark) business and these other issues? I think so.
Furthermore, college is supposed to present the opportunity to better oneself. For many students, they end up bettering their financier's bottom line for decades before they start contributing more generally to the economy by spending that hard-earned cash in the community.
People note the trend to gilt-edged campus facilities, because its cost mostly gets rolled into ever bigger student debts.
Americans should wise up and demand better. Just holding student loan(sharks) to the same still low standards as credit card companies would be a good first step. It's dumb public policy in general to make the cost of not being dumb so high for qualified students. Lack of public financing costs our nation and puts us at a competitive disadvantage.
8
This problem would go away if we take Suze Orman's advice and make student loans dischargeable in a bankruptcy. The cost of education is much more than what the salary you will make will be unless you plan to enter the financial sector.
35
I have been paying 9% interest on my student loan because 20 years ago I unknowingly "consolidated" my students loans which locked in the interest rate in perpetuity.
Our congress wrote this law at the behest of their bankster friends.
Our congress wrote this law at the behest of their bankster friends.
59
This is a revision of a post I sent in earlier. Some of the information in the earlier post was out-of-date:
I was a consumer bankruptcy lawyer for 25 years. I often tried to help borrowers work out debt, as an alternative, so I talked to a lot of collectors during that time. I stopped doing student loan negotiation in the early 2000's because it was too depressing – student loan collection companies were attracted by the fact that some were exempt from Fair Debt Collection Rules. They could, and did, call you every hour, including calling you every hour at work. The kind of company that chose this kind of work was the kind that hates the limitations of courtesy and common sense that are built into standard collection practices -- maybe you don't believe that if you have been on the receiving end of a collection call, but seriously, student loan collections are typically much, much worse -- insulting, denigrating and devoid of common sense; work done by bullies who enjoy getting paid for it. So it would be odd indeed if the same companies could change and help borrowers. New companies are needed, employing operators who are smart, well-trained and have discretion to recommend solutions. Alas, you will have to pay them; it's not easy work and the best work will be done by intelligent people who can think and will be compensated accordingly. (As you might guess, you won't be able to find these people are mortgage servicing firms either ...)
I was a consumer bankruptcy lawyer for 25 years. I often tried to help borrowers work out debt, as an alternative, so I talked to a lot of collectors during that time. I stopped doing student loan negotiation in the early 2000's because it was too depressing – student loan collection companies were attracted by the fact that some were exempt from Fair Debt Collection Rules. They could, and did, call you every hour, including calling you every hour at work. The kind of company that chose this kind of work was the kind that hates the limitations of courtesy and common sense that are built into standard collection practices -- maybe you don't believe that if you have been on the receiving end of a collection call, but seriously, student loan collections are typically much, much worse -- insulting, denigrating and devoid of common sense; work done by bullies who enjoy getting paid for it. So it would be odd indeed if the same companies could change and help borrowers. New companies are needed, employing operators who are smart, well-trained and have discretion to recommend solutions. Alas, you will have to pay them; it's not easy work and the best work will be done by intelligent people who can think and will be compensated accordingly. (As you might guess, you won't be able to find these people are mortgage servicing firms either ...)
48
In 1970, Harvard tuition was 12K/year, in today's dollars. In 1970, the minimum wage was about $20/hr, in today's dollars. Similarly, public colleges also cost three times as much as they used to -- adjusted for inflation.
This is a multi-tiered problem. Low minimum wage. Very few decent, unionized jobs that don't require college. Less state support for higher education (which means not only that public colleges are expensive, but that private colleges don't have to compete against a very low public tuition). Complex regulations and/or institutional nonsense leading to twice as many administrators as there used to be. Banks getting off the hook for the loans.
We have to look at all of it, at the same time. We can't create a system where we tackle only part of it, or the injustice will go elsewhere (such as poor students not being given the loans in the first place, since they are high risk.)
This is a multi-tiered problem. Low minimum wage. Very few decent, unionized jobs that don't require college. Less state support for higher education (which means not only that public colleges are expensive, but that private colleges don't have to compete against a very low public tuition). Complex regulations and/or institutional nonsense leading to twice as many administrators as there used to be. Banks getting off the hook for the loans.
We have to look at all of it, at the same time. We can't create a system where we tackle only part of it, or the injustice will go elsewhere (such as poor students not being given the loans in the first place, since they are high risk.)
48
Getting a higher education has now become a reality of speculation, the same sort of speculation that Wall Street does in taking a chance on having a positive outcome.
What the elephant in the room is that, and this is going to happen, the middle class on down will come to terms with the hard reality that a large percentage of higher degrees are not able to offer good jobs.
It is reasonable to say that the higher education schools ARE GETTING BAILED OUT BY THE FEDERAL GOVERNMENT BACKING THESE UNPAYABLE LOANS.
Like most runs of speculation, the middle class will at some point realize that only degrees with jobs available can be worth this cost. They will cease to get loans for many majors not oriented to work success. Then the higher education system will collapse when the humanities and liberal arts programs go out of existence. This will be the end of civilization as we have known it.
The extreme focus of the corporate structure's maintaining the inequality of the economic system, will in the end bring about their own demise as well as the middle class. There will be a higher education bubble, the same as the housing bubble of 2008, the same as the Great Depression was caused by speculation bubble that placed higher values on stock and real estate not fortified by actual material existence.
Reality brings people and economic structures back to the true sense of their value. The over pricing of higher education and the loan exploitation to bail it out will crash.
What the elephant in the room is that, and this is going to happen, the middle class on down will come to terms with the hard reality that a large percentage of higher degrees are not able to offer good jobs.
It is reasonable to say that the higher education schools ARE GETTING BAILED OUT BY THE FEDERAL GOVERNMENT BACKING THESE UNPAYABLE LOANS.
Like most runs of speculation, the middle class will at some point realize that only degrees with jobs available can be worth this cost. They will cease to get loans for many majors not oriented to work success. Then the higher education system will collapse when the humanities and liberal arts programs go out of existence. This will be the end of civilization as we have known it.
The extreme focus of the corporate structure's maintaining the inequality of the economic system, will in the end bring about their own demise as well as the middle class. There will be a higher education bubble, the same as the housing bubble of 2008, the same as the Great Depression was caused by speculation bubble that placed higher values on stock and real estate not fortified by actual material existence.
Reality brings people and economic structures back to the true sense of their value. The over pricing of higher education and the loan exploitation to bail it out will crash.
1
"A vast majority of the more than 10 million Americans who have defaulted on or are behind on repaying their student loans could have benefited from income-driven repayment plans "
Students would benefit if the feds would turn off the easy-money spigot that lets universities jack up tuition at will. They hammer medical costs but subsidize the cost of education.
Students would benefit if the feds would turn off the easy-money spigot that lets universities jack up tuition at will. They hammer medical costs but subsidize the cost of education.
6
Did we not learn anything from the mortgage crisis? When it is in the financial interest of a company push people into default, they will push people into default.
You want to change the system? Allow student loan debt to be discharged via bankruptcy. This is often the only protection that borrowers have when these companies decide to play hard ball.
You want to change the system? Allow student loan debt to be discharged via bankruptcy. This is often the only protection that borrowers have when these companies decide to play hard ball.
11
Yet another example of government failing to regulate predatory finance. Worse, it appears government is little more than the client of of the finance industry. It really seems that government - all branches - is now much more concerned with protecting corporate interests, not the public.
3
Wow, this is timely! Just sent a letter to my loan provider Navient yesterday detailing my long list of issues since they took over "management" of my loan a year ago. Ironically, it's probably taken 20 hours of my personal time to manage them -- with repeated calls, letters, etc. Oh fun, another round of customer service surprise! Spin and see which representative you get on the phone and you will receive some new -- and conflicting -- guidance or information.
7
It's no coincidence that just before the HUGE growth in pushing exorbitant loans onto students began, Congress (under pressure from bank lobbyists, who wrote the legislation) forbid a person's ability to include student loans in bankruptcy proceedings. So it's Congress who should sort of this mess they created. A nation that would hobble its young people -- just starting out in life, having gone to school to get ahead -- with outrageous debts is a shameless nation, indeed.
8
Perhaps an app would help to remind the students and their legal guardians just how much student loan debt they are accruing daily. It stuns me when I meet people with huge student loans and they act like they just found out about it.
3
The behavior of student loan managers described here is sickening and should be criminalized. The other frightening issue implied by this report is that these students, who presumably attended college with the loans, lack the cognitive wherewithal to take control of their own finances. A few weeks ago, while visiting a bank in my neighborhood, I saw a sign offering student loan refinancing at rates lower than 3%. How come honest banks aren't informing ex-students of these offers and cutting into the profits of the rapacious student-loan industry?
3
I am a high-debt borrower. I have law school loans with practically usurious interest rates. My income is such that I am able to make payments toward loan payoff, and yet my servicer still wants to foil me at every turn. I requested a payment plan change from Income Based to Extended Fixed in May. It took my servicer 4 months and a dozen phone calls to update my plan. All the while, they put my loans on forbearance even though that's not what I wanted to do because of interest accrual! And I am an over-educated, financially savvy individual - God help those who are not.
73
So give the $600 million per year directly to students instead of a profit driven middle man organization who has opposite interests to what the law, and the students, would have.
6
The Student Loan "Business"
and the Colleges that collude with them
are little better than Loan Sharks
sadly supported and legalised by the
Federal Government.
and the Colleges that collude with them
are little better than Loan Sharks
sadly supported and legalised by the
Federal Government.
We use deregulated banks as lenders of student loans and we feed them our children's future. How can there be a middle ground now that colleges have treated this trend as a reason to loot those same students? There is no way that most of these loans can be completely paid back. Those who try are living pay check to pay check in over crowded conditions like dorm rooms they cannot seem to escape or are back living at home with their parents. And those are the successful ones. Most have become the new working poor and yet both parties are trying to find relevance with young voters. Try offering them debt forgiveness and watch them line up at the polls. Nothing less can relieve the nation's youngest and brightest of the woe of being over taxed by our newest corporate citizens. 9% interest on a debt as large as a student loan is nothing short of privatized taxation. Am I wrong?
4
Debtor students should go unrescued so that banks, and debt collectors can make large profits. Debtor students borrowed money when they had no assets and such persons should be punished, like those people who borrowed money for mortgages without having the means to pay their debts. One cannot expect banks and other lenders and debt collectors to only lend money to persons who have a demonstrable means and history of paying their debts. Who could they take advantage of, profit from if they are not allowed to exploit students?
It is such a no brainier that the federal Gov't should directly lend to students with no middleman
7
The federal student loan program is my biggest political pet peeve. It's the law of unintended consequences in its purest form. What was the point of federally-backed student loans? To give less wealthy students equal access to education. The result, however, has been that college has become less affordable for everyone. Instead of the poorer kids working full-time jobs to put themselves through college (or delaying college until they could pay for it), poor and middle class kids alike take on massive debt to attend colleges that used to cost a whole lot less. And everybody does it, not just the kids who want it the most.
No wonder we're in such an economic quagmire! Whoever thought burdening college grads with massive debt would lead to good results?!
No wonder we're in such an economic quagmire! Whoever thought burdening college grads with massive debt would lead to good results?!
2
There is a huge problem with income contingent programs: it includes your total family income, not just your own. When I studied public policy, I knew that I would work for lower salaries in government, but I knew that there was a income contingent program for public service. Last year I found out that my wife's income would be included in my consolidation request and that I couldn't qualify for income contigent unless we filed our taxes as individuals, which then results in losing many tax benefits. If I make $40K and my wife earns $70, we look wealthy is the eyes of this program. These programs sound good in name, but there is so much fine print and ridiculous rules that they help almost no one and that's why no one is applying, and that's what the Editorial Board needs to investigate.
5
There will, in the next 10 years, have to be some kind of a bailout or forgiveness plan because this can't go on. There will be complete economic devastation to this country. Total overhaul of the higher education system in this country should come first, so that this pattern does not continue to repeat itself. But that will only happen if Americans stand together.
1
What are these companies paid for servicing? What do they get paid when there is a default? Quite often the companies get paid more when there is a default. In those cases there is no incentive to resolve defaults.
5
Over a period of 20+ years, I have paid $17,000 in interest on $12,000 in student loans. My balance is $16,000. Someone is making a lot of money off me. I find it criminal.
125
Based on the information you provided - I calculate an interest rate of 7.83%, and making monthly payments of $71 dollars towards the student loans. This would equate to original balance of $12,000, $17,000 in paid interest and ending balance of $16,000 over 20 years.
If you had made a payment of an extra $6.85 PER WEEK, your student loans would've been paid off in 20 years...kinda silly you didn't just do that...
If you had made a payment of an extra $6.85 PER WEEK, your student loans would've been paid off in 20 years...kinda silly you didn't just do that...
2
Credit cards come with information on how long it will take to pay off the debt if only the minimum is paid. How much interest you will pay in the course of that time is also given.
If such transparency was provided for student college loans, the collage industry would collapse overnight.
Many people are still paying on collage loans after 30 years or more. Why? Because of the misinformation given. Forebearance and deferrment are standard practices of the college swindling industry.
People poke fun at the 'liberal' degrees, the artists with college debt. What about teachers? What about social workers? There are many careers that are NOT worth 30+ years of college loans because of all the swindling, hidden practices going on. Your loan sold to another company, more fees tacked on and that becomes the principal.
If such transparency was provided for student college loans, the collage industry would collapse overnight.
Many people are still paying on collage loans after 30 years or more. Why? Because of the misinformation given. Forebearance and deferrment are standard practices of the college swindling industry.
People poke fun at the 'liberal' degrees, the artists with college debt. What about teachers? What about social workers? There are many careers that are NOT worth 30+ years of college loans because of all the swindling, hidden practices going on. Your loan sold to another company, more fees tacked on and that becomes the principal.
8
I was a consumer bankruptcy lawyer for 25 years. I often tried to help borrowers work out debt, as an alternative, so I talked to a lot of collectors during that time. Student loan collection companies are attracted by the fact that they are exempt from Fair Debt Collection Rules. They can, and do, call you every hour, including calling you every hour at work, wrecking your status at your work site. The kind of company that chooses these contracts is the kind that hates the limitations of courtesy and common sense that are built into standard collection practices -- maybe you don't believe that if you have been on the receiving end of a credit card collection call, but seriously, student loan collections are typically much, much worse -- insulting, denigrating and devoid of common sense. There are sometimes a few good apples but usually the work is done by bullies who enjoy getting paid for it. So it would be odd indeed if the same companies could change and help borrowers. New companies are needed, employing operators who are smart, well-trained and have discretion to recommend solutions. Alas, you will have to pay them; it's not easy work and the best work will be done by intelligent people who can think and will be compensated accordingly. (As you might guess, you won't be able to find these people are mortgage servicing firms either ...)
7
Please, I wish all my debts could be paid with an income based plan, but that is not the way the world works. That way I could sit in my million dollar home, with mortgage, and pay with a minimum wage job. God, life would be easy. Contracts are contracts, or maybe O does not believe so since he is not about the following of 'law'.
2
Actually, no. That's not how it works. See, with this kind of debt, even with an IBR, you still are barred from getting a mortgage. But hey, I'm sure you'll enjoy watching the U.S. economy completely collapse while you're in your golden years...
Contrary to popular belief, student loans can be discharged through bankruptcy. When you file a personal bankruptcy, you also file an adversary with the court to determine if your student loans can be discharged. Although everyone says you can’t win, that is not true. More than 60% of those who file an adversary have all, or part, of their students loans discharged through bankruptcy. More and more people are successful at having their student loans discharged through bankruptcy. It costs nothing to file an adversary. You can do it yourself. So, if you find yourself faced with personal bankruptcy, be sure to include your student loans. You have every right to also have them discharged. Many free articles on the web tell you have to do this. Simply search phrases, like “bankrupt your student loans.” Conservatives should be staunch supporters of returning student loans to being included in a standard bankruptcy. The founders of this country believed in bankruptcy and included it in Article 1 of the U.S. Constitution. The founders wanted to eliminate debtor prisons and understood the need to facilitate citizens gaining a “fresh start” from financial troubles. Remember, if you don’t include your student loans in a personal bankruptcy, you may be stuck with them your entire life.
1
Students go unrescued because they are politically powerless. Just like homeowners were left with homes with artificially inflated values after Wall Street pumped it up until it popped -- banks got bailed out, investors got bailed out, while millions of homeowners got screwed by service providers and kicked out onto the street. It's all about power, and campaign contributions, and students in debt having none they are left to drown.
4
Real accountability for these companies has to start now. White collar crime, and that is what this is, goes unpunished, so they are simply emboldened to do more. Has anyone looked into the campaign contributions of these companies? My guess is no one is going after them because they grease the wheels along the way.
If they can't follow the rules they agreed to, then turn off the tap. Then make them reimburse the students for the amount they could have saved. This is basic business. Our government should do much better in policing companies we give millions of dollars to.
If they can't follow the rules they agreed to, then turn off the tap. Then make them reimburse the students for the amount they could have saved. This is basic business. Our government should do much better in policing companies we give millions of dollars to.
4
"If they can't follow the rules they agreed to"....oh you mean like the contract signed by the student to repay their debt? Apparently those rules don't apply.
3
So to all the responsible college students that either (i) went to a lower tuition school (community college, in-state public), (ii) worked through college to pay tuition or (iii) took out loans but have remained current on them, likely at the expense of saving for the future - if we discharge all student loans, which appears from the comments to be a super popular idea - what do those responsible adults get? Oh yea, a higher tax bill to pay for their classmates. What kind of responsibility does that teach to that generation?
5
While I hate the idea of letting predatory lenders off the hook for their role in creating this problem, I like the idea that a college student carefully considers his/her degree choice in relation to its ability to provide employment that will support a lifestyle and debt repayment. Paper mills and nearly worthless degrees, even from respected educational institutions, have watered down the meaning of a college education. Unfortunately, it may be unrealistic to expect the average 18 year-old to understand the consequences of their choices.
2
Actually, you should be arguing against overinflated tuition prices. College presidents are paying themselves hundreds of thousands of dollars on the backs of people who will one day be in the position of trying to support this economy. It won't work and isn't working.
1
I have been paying approximately $2,000 a month on my student loans for 7 years, and owe more today than when I graduated, due to extremely high interest rates on my loans (a majority of which are federal). I attended a public university. My husband who also owes over $100k in student loans recently attempted to lower his monthly payments due to a period of unemployment and the servicing companies denied him any opportunity to do so. Oversight is needed. There is a student loan crisis in our country.
18
These articles inevitable attract comments that blame the student for knowingly taking out loans to study some "useless" subject. How on earth is a 17-year-old supposed to anticipate what the future will bring. I know that I was told to "follow your passion" and "do what you love, the money will follow." Boomer hogwash, of course, but I didn't really figure any of that out until I was over 30 and was shackled by student debt and underemployed. Do you think a university is going to try to dissuade you from getting a BA in "gender and sexuality studies" or "cinema studies"? (Those are two that I picked off the list of majors at NYU, whose retail price is $66K a year including room and board.
37
This isn't only about 17-year-olds. You can go to graduate school as a clear-eyed adult and sign on for these loans because what are your options?! You want that degree, and the tuition is allowed to be overpriced because it's unregulated. The only other choice would be to have only very wealthy people going to college. I thought this was supposed to be the "land of opportunity" but there is only true freedom for the rich.
1
Existing loan agreements, student or otherwise, are not required to be re-negotiated simply because the borrower would like them to be or makes a unilateral offer to do so. I'm not aware of any creditor/lender relationship where this can happen without mutual agreement.
Also, the general non-dischargeability of student loans in bankruptcy is due to the fact that, absent these special protections for lenders, unsecured loans for tens or hundreds of thousands of dollars to teenagers with little or no income would likely not be made in the first place, and certainly at anywhere close to the rates they are typically made today. This second point is a fact. Given normal underwriting standards in a private market and without major guarantees, no lender would make loans on those terms. Banks take the risk of making loans to corporations that are dischargeable in bankruptcy because a corporation usually has earnings (or at least cashflows), or assets that can be used as collateral, or something the bank can cling to to discern the risk of the loan. Typically none of these exist for a prospective college student.
Also, the general non-dischargeability of student loans in bankruptcy is due to the fact that, absent these special protections for lenders, unsecured loans for tens or hundreds of thousands of dollars to teenagers with little or no income would likely not be made in the first place, and certainly at anywhere close to the rates they are typically made today. This second point is a fact. Given normal underwriting standards in a private market and without major guarantees, no lender would make loans on those terms. Banks take the risk of making loans to corporations that are dischargeable in bankruptcy because a corporation usually has earnings (or at least cashflows), or assets that can be used as collateral, or something the bank can cling to to discern the risk of the loan. Typically none of these exist for a prospective college student.
After graduate school, I found myself making little money as a librarian. For long, joyless, sleepless , one-meal-a-day months, I called every day to try to negotiate a payment plan for my student loans that I could actually live up to. Before they would even talk to me about it, I was told, I needed to make good on $1500 in delinquent payments because my parents (not talking to me) had stopped paying the undergraduate portion of my loans as they had promised.
But if I sold all my belongings and skipped paying my rent, I said, I’d be lucky if it came to even half of that amount. The Sallie Mae representative’s cold response was a defining moment in my life:
“Then send us half,” she said.
So that’s how it was. There was nobody seriously interested in helping me or working with me. The realization was liberating. I stopped resisting default. My paychecks were garnished for years and years, my debt bought and sold by more predatory organizations than I could ever keep track of, the penalties ultimately doubling my original bill. My credit was ruined, of course. And oh, the daily shame and embarrassment of it all.
Grinding poverty—I’ve always found that an apt and eloquent phrase. But when you don’t have money or things, you become keenly aware of the real blessings in your life, and one of mine was that I no longer had to talk every day to people like THAT.
Anything and everything that can possibly be done to rescue young people today from these people should be tried.
But if I sold all my belongings and skipped paying my rent, I said, I’d be lucky if it came to even half of that amount. The Sallie Mae representative’s cold response was a defining moment in my life:
“Then send us half,” she said.
So that’s how it was. There was nobody seriously interested in helping me or working with me. The realization was liberating. I stopped resisting default. My paychecks were garnished for years and years, my debt bought and sold by more predatory organizations than I could ever keep track of, the penalties ultimately doubling my original bill. My credit was ruined, of course. And oh, the daily shame and embarrassment of it all.
Grinding poverty—I’ve always found that an apt and eloquent phrase. But when you don’t have money or things, you become keenly aware of the real blessings in your life, and one of mine was that I no longer had to talk every day to people like THAT.
Anything and everything that can possibly be done to rescue young people today from these people should be tried.
104
Yet another attempt to treat the symptom rather than the disease. The disease is a federal student loan program that funnels an unlimited amount of federally-backed loan dollars into colleges and universities that have no incentive to contain costs. College tuitions have increase more than 10% every 5 year period since 1984, in today's dollars: http://trends.collegeboard.org/college-pricing/figures-tables/tuition-fe.... The increase is more than 20% during certain periods. Again, those statistics are already adjusted for inflation!
It cost, on average, $2800 a year to attend a 4-year public university in 1984 ($8400 if you throw in room and board) IN TODAY'S DOLLARS. A student doesn't need a loan to pay those costs if he/she works his/her way through school like so many students used to do. It costs over $9000 ($19,000 with room and board) today.
Any plan to fix the student debt problem that does not address these rising costs will be nothing more than a Band-Aid. Get the Feds out of the student loan business altogether (while increasing grants to the neediest), and allow students loans to be dischargeable in bankruptcy. The cost of college will collapse overnight and the colleges who can't keep up will fail. When will we finally end this racket?!
It cost, on average, $2800 a year to attend a 4-year public university in 1984 ($8400 if you throw in room and board) IN TODAY'S DOLLARS. A student doesn't need a loan to pay those costs if he/she works his/her way through school like so many students used to do. It costs over $9000 ($19,000 with room and board) today.
Any plan to fix the student debt problem that does not address these rising costs will be nothing more than a Band-Aid. Get the Feds out of the student loan business altogether (while increasing grants to the neediest), and allow students loans to be dischargeable in bankruptcy. The cost of college will collapse overnight and the colleges who can't keep up will fail. When will we finally end this racket?!
3
You could not be more correct!! Why is no one else noticing this??
2
If a Liberal Arts major accumulates over $ 100,000 in student loans this student should not be rescued, but instead be institutionalized since they have no grip on the realities of the job market.
8
Would you please contact my niece, repeat what you commented, and tell her I approve? Three years after graduating and one dead end job after another.
Living with her parents, who, on second thought need your advice as well-- they are shopping around for a new car for her as a "Christmas" gift from Jesus.
Living with her parents, who, on second thought need your advice as well-- they are shopping around for a new car for her as a "Christmas" gift from Jesus.
I expect Trump to declare "Winners declare bankruptcy... Look at me, I've done it many times. Only losers pay their bills... That's why I have so much money, I keep it for myself..."
8
The killers are the way-above-market, usurious interest rates for students, and even higher for parents if they've taken out the federally backed Parent Plus loans. These interest rates are double or more the going rates of mortgages, and 5-6 times the rates the banks (and the federal government) are paying for that money. So even if students (not available to parents) get a reduced payment while they theoretically are increasing their incomes over time, the loan balances balloon to morale- and budget- crushing levels. Supposedly there's a new program where balances are forgiven after 25-30 years with some of these reduced-payment plans (for students, not for parents), but the details of those in terms of tax liabilities on such balances are not clearly explained. Countries like Australia and Canada, and in Europe, don't do this to their citizens, young or older. It may be free-market and very profitable for some at the top, but it's an increasing financial and psychological burden on tens of millions of Americans that the citizens of our international economic competitors don't have to face. Selfish, short-sighted, anti-American, and stupid.
6
If a computer can do my taxes, why can't a computer process all these loans? Then all the ill serving loan servicers could be laid off to seek work in another industry, preferably after piling on some student loan debt of their own.
6
in 1989 I got hurt on the job shortly after graduating college. One of the results was defaulting on my student loans - the private loan servicer at the the time told me that there were programs that could defer my payments, but I wasn't eligible for them until I got current with my payments - the very definition of a Catch-22. It took several years to get past the damage that that did to my credit, though eventually my wife and I were fortunate enough to be able to use some of her small inheritance from a relative to pay them off.
During my time in default I encountered an ever changing roster of loan officers and servicers making up rules as they went along (i.e. "we're no longer accepting the payment we agreed upon, it's too low. You have to increase it.), and making "helpful" suggestions like "why don't you get a third job" or "I'm sure your parents will make your payments if you ask them."
Too this day my main regret is that I didn't get the lump sum I re-payed them changed into pennies and deliver to them in a rental truck.
During my time in default I encountered an ever changing roster of loan officers and servicers making up rules as they went along (i.e. "we're no longer accepting the payment we agreed upon, it's too low. You have to increase it.), and making "helpful" suggestions like "why don't you get a third job" or "I'm sure your parents will make your payments if you ask them."
Too this day my main regret is that I didn't get the lump sum I re-payed them changed into pennies and deliver to them in a rental truck.
5
The real scandal is that our federal government has any involvement in student loans. Why do you think that we have the proliferation of for-profit online colleges? If there is not an odds on probability that a student can repay a loan, it should not be made. I have no issue if a private lender or a bank has to take a loss on a student loan, for which there should be no bailout. Why should I through my tax dollars be forced to pay for someone else's college education? If you can't afford a four-year school, attend junior college for less than $5000/year all in. Rather than campaigning for loan forgiveness, campaign for people to uphold their responsibilities and pay their debts. Rick Santelli's rant that started the Tea Party in February of 2009 was spot on.
4
I have a Perkins loan through my school. The primary servicer was absolutely terrible at sending out regular statements and were difficult to get in contact with. They would send maybe 4-5 statements which made it so that I had missed payments. When I got the statements I made the payments.
A year after I graduated, I was back in school for a couple of years and qualified for a deferment. I finished the program and never got any notice from my former school or the servicer. A year and a half goes by and I get an email saying there is a new provider. 2-3 months later, I get a bill saying the past due amount is $700 and the account is delinquent and I'm in default. I called and they said the only way to get the delinquency removed is if I had a hardship forbearance and I just qualified for an IBR with all my other loans.
They JUST started reporting the account to the credit bureaus and my credit score went down 80 points. I recently made a huge payment. I need to find a new apartment soon and that's likely gonna be impossible.
A year after I graduated, I was back in school for a couple of years and qualified for a deferment. I finished the program and never got any notice from my former school or the servicer. A year and a half goes by and I get an email saying there is a new provider. 2-3 months later, I get a bill saying the past due amount is $700 and the account is delinquent and I'm in default. I called and they said the only way to get the delinquency removed is if I had a hardship forbearance and I just qualified for an IBR with all my other loans.
They JUST started reporting the account to the credit bureaus and my credit score went down 80 points. I recently made a huge payment. I need to find a new apartment soon and that's likely gonna be impossible.
5
The only take away I get from this is "it's their fault, not mine." Do you actually think the loan servicer is supposed to text you frequently to remind you of YOUR responsibility?
1
Look at how a typical college student lives today compared to thirty years ago. Sorry, but I have no respect or sympathy for these pampered, irresponsible narcissists.
Time for them to learn a lesson and pay what they owe. I want my tax dollars to help the people who really need help, and not people who made selfish choices.
Time for them to learn a lesson and pay what they owe. I want my tax dollars to help the people who really need help, and not people who made selfish choices.
6
I attended "expensive" private colleges, lived in brand-new dorms and spent a year studying and travelling in Europe. My total student debt? $2,000. Why? Because my most expensive year of schooling was just $2,600. To get the equivalent schooling at the universities I attended now cost (tuition alone - no room and board or books and fees) over $60,000. That's more than the median annual income in the U.S. This is why so many students are drowning in debt ... not their so-called privileged student lifestyle.
2
Finally some recognition of the real culprits. Great story. What it fails to mention is the many of us who are co-signers of student loans. When the student defaults we become primary and our credit records reflect their issues. It can take down an entire family.
Notice that politicians only want to talk about current students and debt-free education because it buys votes.
19 million students in default is an enormous drag on the economy.
Notice that politicians only want to talk about current students and debt-free education because it buys votes.
19 million students in default is an enormous drag on the economy.
12
Congress should legislate away the Brunner test. Brunner prevents students from discharging their impossible to repay student loans in bankruptcy.
Brunner requires;
1) The debtor cannot maintain a minimal standard of living if forced to repay the loans;
2) Additional circumstances exist indicating that the [bankrupt student's] state of affairs are likely to persist for a significant portion of the repayment period;
3) The debtor has made good faith efforts to repay the loans.
I am employed, but I cannot afford anything beyond my income-based repayment minimum payments. I haven't missed a payment. Yet, my loan balances are increasing because my income-based minimum payments cover a fraction of the interest applied to my loans every month.
My circumstance is ineligible for bankruptcy relief under Brunner because my income will theoretically increase as I progress through my career.
Brunner fails to consider that my income does not increase relative with the 8% compounding interest on my student loans. My income hasn't, and never will.
Yet bankruptcy courts seldom relieve student loans because the second factor of the Brunner test can be satisfied by a speculative judge of a student's future income. This leaves me to the mercy of my loan servicers, which you highlighted, leaves much to be improved.
Brunner requires;
1) The debtor cannot maintain a minimal standard of living if forced to repay the loans;
2) Additional circumstances exist indicating that the [bankrupt student's] state of affairs are likely to persist for a significant portion of the repayment period;
3) The debtor has made good faith efforts to repay the loans.
I am employed, but I cannot afford anything beyond my income-based repayment minimum payments. I haven't missed a payment. Yet, my loan balances are increasing because my income-based minimum payments cover a fraction of the interest applied to my loans every month.
My circumstance is ineligible for bankruptcy relief under Brunner because my income will theoretically increase as I progress through my career.
Brunner fails to consider that my income does not increase relative with the 8% compounding interest on my student loans. My income hasn't, and never will.
Yet bankruptcy courts seldom relieve student loans because the second factor of the Brunner test can be satisfied by a speculative judge of a student's future income. This leaves me to the mercy of my loan servicers, which you highlighted, leaves much to be improved.
10
So this is how the bankster industry repays the society that bailed it out in 2008. I hope we all remember this when the next financial crisis hits (and yes, there will be a next time).
15
After I graduated more than a decade ago, I became very ill and was ill for nearly two years. I asked about reduced payments, but Sallie Mae told me my only option was forbearance. Had my husband and I known of options, we could have made minimum payments during that time. (We are still paying on the loan only now will be paying more for a longer period of time.) This is infuriating.
39
We are in a similar situation and find ourselves in our late 60s with a huge balance due on two loans that were consolidated into one that turned out to bear a higher interest rate. It is unsustainable.
I graduated in 1977 and tried to repay my loan but working as a temp. for 11 years made it impossible - the loan collection agencies were downright hostile and for the next 30 years i received nothing but letters that demanded the full payment - i borrow @ $3000 which had ballooned to more than double that amount. Now living on $10k/yr soc sec in federally subsidized housing I am protected from their insanity by my poverty! The system is broken and need fixing !! Large bureaucracies tend to be protective towards their Jobs instead of taking care of the reason the are in business - they function to function - not to achieve goals - it is demoralizing how bad things have become under these bloated companies rules. We need Bernie !!
6
But yet you spend your money on a NYT subscription?
2
The information about repayment options like IBR is easily available online. What kind of schools are these that are turning out grads who can't even perform that basic research task? Probably these bogus for-profit rackets like the Cezanne Online Institute of Cake Decorating Arts and so forth. Make tuition free, but only for real schools who will give students a real education.
I ma 61 and went to school many years ago when it was still relatively affordable with a small loan and working part time..I will say however, I have seen friends kids using really large loans for everything under the sun besides tuition and books..Vacations, car payments, trips, meals out etc etc. it seems the lines have blurred regarding what are true school expenses and outside the lines spending..In my day, any loans, scholarships, etc were paid directly to the facility not to the students..some of the loans today are like a standard personal loan to spend any way you wish..a recipe for disaster..It is always easier to apply for that 5K extra for a cushion but once spent, it is then owed..Yes college should be made much more affordable for todays kids, but with all the financial predators out there, students and their families really need to use some common sense.
9
Just look at the expensive shiny new cars in every college parking lot to know what the loans were spent on.
1
I graduated from a highly rwcommended liberal arts college in 1971. My father was a physical therapist and his salary topped out at about thirty thousand in the late 80's. He payed cash for three children to go to college and graduate. The economy was better balanced and the distrubution of money was more equality driven from the end of WWII and 1973 when the last of us graduated and then the oil embargo, closing of the steel mills and the beginning of not giving proper raises that has now culminated in 40 odd years of destoying the middle class.
The financing of middle class college level education has moved from the family structure basically based on love and support to do the best for their children to a profit privatized banking system supported by the federal Government. Third party shills with no emotional ties of caring about each and everyone that money is loaned. The middle class now submits to a second class system of economic deprivation and no longer has the assurance that their children will have a better economic life than theirs.
The cost of higher education, separate from all the other economic factors that have destroyed the middle class, is a catastrophic cause of the economic deprivation of the middle class. The taking hostage of the middle class already trapped in a no win economic system for the parents and then placing their children with more debt than a middle class house cost in the 50 & 60's.
The middle class is lost in economic decay.
The financing of middle class college level education has moved from the family structure basically based on love and support to do the best for their children to a profit privatized banking system supported by the federal Government. Third party shills with no emotional ties of caring about each and everyone that money is loaned. The middle class now submits to a second class system of economic deprivation and no longer has the assurance that their children will have a better economic life than theirs.
The cost of higher education, separate from all the other economic factors that have destroyed the middle class, is a catastrophic cause of the economic deprivation of the middle class. The taking hostage of the middle class already trapped in a no win economic system for the parents and then placing their children with more debt than a middle class house cost in the 50 & 60's.
The middle class is lost in economic decay.
56
I couldn't agree more with this. And the fundamental problem is cost. Tuition at a four-year public university is 4 times more expensive than it was 30 years ago IN TODAY'S DOLLARS. Federally-backed loans don't help students. They help increasingly bloated colleges continually hike their prices.
2
People don't want to ask the hard questions about why college (and also medical bills) have skyrocketed far more in cost than the rest of the economy. Frankly, the college you went to in 1971 was nothing like colleges are today. If you don't have kids, or you have not visited a few colleges, you may have no idea. Like you I went to schools with old buildings -- plain concrete-block dorms -- cafeterias that served mystery meat. And the professors and administrators made decent, but modest pay (their real benefits were short hours, long vacations and generous state pensions).
ALL THAT CHANGED years ago. My neice's "dorm" is a 3 bedroom townhouse, with it's own garage, cable & wi fi. It was way nicer than my first HOUSE. Her college has gyms, spas, health clubs, etc. All the buildings are gorgeous and new; they are constantly tearing stuff down & building anew. The cafeterias serve Starbucks coffee and have sushi bars. The administrators and teachers made six figure salaries -- the college president earns millions. I can barely stand to talk about the sports programs; they have a new stadium that rivals that in many major cities.
ALL OF THAT COSTS A FORTUNE. When I think of the modest state university I attended in the 70s, it sounds like something out of Castro's Cuba. It does not exist today, and neither does the $1800 yearly tuition, room & board.
ALL THAT CHANGED years ago. My neice's "dorm" is a 3 bedroom townhouse, with it's own garage, cable & wi fi. It was way nicer than my first HOUSE. Her college has gyms, spas, health clubs, etc. All the buildings are gorgeous and new; they are constantly tearing stuff down & building anew. The cafeterias serve Starbucks coffee and have sushi bars. The administrators and teachers made six figure salaries -- the college president earns millions. I can barely stand to talk about the sports programs; they have a new stadium that rivals that in many major cities.
ALL OF THAT COSTS A FORTUNE. When I think of the modest state university I attended in the 70s, it sounds like something out of Castro's Cuba. It does not exist today, and neither does the $1800 yearly tuition, room & board.
3
The most telling moment of my student debt repaying career, a career I am still enjoying, is when I was 6-months ahead in payments. Out of curiosity, I applied for a .25 interest rate reduction via setting up automatic payments on Nelnet (which has a 1% service fee on the debt, too). Oddly enough, because I paid ahead, they would not allow me to enroll. Surely, it is a bad idea to set up auto-payments, but I was curious to see what it was all about.
At that point, you realize the cage is sealed on both sides. If you pay ahead, you are punished. Even though I enjoy a great job in senior consulting with the ability to repay in large sums, the damage to my 26-32 life (I'm 29), in terms of being able to save for a house, etc, has been astronomical. I simply cannot comprehend how others do it without a high-paying career manage this.
However, when I attended my MBA, Miami Oxford was too busy redoing the college campus at a tune of $98 million, instead of offering scholarships or grants. Colleges are in on the game too - offer the lowest amount possible and dump the rest on college students.
The racket has to stop. It's time to hold those colleges and government accountable. Even though I'd probably benefit from simpler tax codes, capital gains reforms, etc, I cannot let my generation fall behind because this problem is larger than I am.
At that point, you realize the cage is sealed on both sides. If you pay ahead, you are punished. Even though I enjoy a great job in senior consulting with the ability to repay in large sums, the damage to my 26-32 life (I'm 29), in terms of being able to save for a house, etc, has been astronomical. I simply cannot comprehend how others do it without a high-paying career manage this.
However, when I attended my MBA, Miami Oxford was too busy redoing the college campus at a tune of $98 million, instead of offering scholarships or grants. Colleges are in on the game too - offer the lowest amount possible and dump the rest on college students.
The racket has to stop. It's time to hold those colleges and government accountable. Even though I'd probably benefit from simpler tax codes, capital gains reforms, etc, I cannot let my generation fall behind because this problem is larger than I am.
58
I would like to see the NYT do an average student loan debt by country analysis.
8
The average student loan debt in the US is a whopping...$26,000.
Less than a mid-range car.
If a student majors in a reasonable subject that has potential to lead to a job (in other words, not some puff subject like Gender Studies or Film Criticism), they could pay that off easily in 10 years. That is not unreasonable to payback 4-5 years of college.
The handful of aspirational students who choose very costly schools, and reject "no name" schools, and then run up $250,000 in debt -- they are outliers. I have to wonder where their common sense was, or that of their parents, to let them purchase a luxury education on a beer budget. That's sad. Hopefully they will learn a lot from that lesson.
But it's not the norm, and we don't help this discussion by exaggerating stuff out of proportion.
Less than a mid-range car.
If a student majors in a reasonable subject that has potential to lead to a job (in other words, not some puff subject like Gender Studies or Film Criticism), they could pay that off easily in 10 years. That is not unreasonable to payback 4-5 years of college.
The handful of aspirational students who choose very costly schools, and reject "no name" schools, and then run up $250,000 in debt -- they are outliers. I have to wonder where their common sense was, or that of their parents, to let them purchase a luxury education on a beer budget. That's sad. Hopefully they will learn a lot from that lesson.
But it's not the norm, and we don't help this discussion by exaggerating stuff out of proportion.
2
I worked while I was in school and after school paid off my student loans which resulted in me not being able to buy a car or a house and I could not spend money foolishly on vacations and partying. I had to dedicate myself to paying off what I borrowed and I worked hard to get it over with as fast as I could. I am not sure students today get that sense of obligation. They live too large during school and then paying off large loan balances after school is inconvenient.
It's also quite striking that people who have college educations cannot figure out how to restructure their debt and are taking advice from customer service agents who likely don't have a college education. And isn't this information available on the web?
Having said all this when big government gets in bed with big business we all know who is getting ripped off.
It's also quite striking that people who have college educations cannot figure out how to restructure their debt and are taking advice from customer service agents who likely don't have a college education. And isn't this information available on the web?
Having said all this when big government gets in bed with big business we all know who is getting ripped off.
17
A few years back (more than I care to think about, really LOL) I was back in school part-time, which at that era, would not qualify you for deferments, and frelancing (aka: no reliable paydays). I had the "bank loan" with Chemical (dating myself AGAIN). My whole experience with them, where I also had my chequeing account, was that they'd bend over backwards for customers. I had called to explain why I would have to miss my payment that month and the CSR asked me some questions about my situation and asked "Would you like a hardship deferment? We can do that for up to a year." It enabled me to relax a little, finish my classes and, by the end of that time, I had a nice entry-level job at a textile firm and was able to pay off my loan. Without that kindness, I probably would have defaulted, so, it's a good idea for lenders to try and go an extra mile for customers who are having a hard time...not unusual for young people starting out!
12
I am 74 years old and all my life people keep telling me that we live in a great country. In the 20's my mother immigrated from Sweden leaving 4 siblings there. My cousins in Sweden enjoy free medical care and free education through college while we turn vulture loan sharks loose on young naive students.
The United States has gone full circle from a vast country full of untold wealth to a pitiful collection of miserable people fighting for a decent life.
The United States has gone full circle from a vast country full of untold wealth to a pitiful collection of miserable people fighting for a decent life.
126
There are many comments are the fact that it is unfair that students loans can't be cleared through personal bankruptcy. These people have a short memories. The reason that they can't be cleared is that there was a uproar over professionals like doctors borrowing six figures for their educations and then defaulting on their loans and making big dollars in successful careers without any penalty or punishment. Clearly abuses in the loan market need to be addressed but it is important that if you take out large amounts of student loans that you consider how you are going to repay it. If you borrow a lot of money for a degree that gets you a barista's job at Starbucks than why should society at large be responsible for clearing your debt?
10
Todd - I agree that federal backing of student loans is incompatible with making those loans dischargeable in bankruptcy. Because the feds do not make loan decisions based on who is most likely to pay them back. And the American taxpayer should not be on the hook for others' irresponsible borrowing. But federal backing of student loans is the underlying problem. We need to return some sanity to the student loan process. And if the result is that less students can get massive loans, so be it. They can go get a job and foot the bill themselves. And that bill will be a lot smaller than it is today because colleges will be forced to compete for clients by cutting costs ... something they haven't had to do for a very long time.
I remember those abuses very well. One that stuck in my mind,were a pair of married medical students. They borrowed the absolute max in loans, and also lived high on the hob -- fancy apartment, cars, vacations -- then graduated, and literally the next day, they both defaulted on their loans. They then opened their own medical practices, free of any debt.
It wasn't JUST doctors, but they typically have the highest college bills since they attend for long.
We are asking lenders to give loans to 17 year old teenagers, most of whom have never worked -- who have no money of their own -- who have no skills -- no assets -- and the lender has zero say-so about where the kid goes to school, what they study, if they are serious students or partying fools. A student might well borrow $180,000 to attend a "name" college, take an extra 2 years to graduate a 4 year program, and graduate with a degree in....Gender Studies. Or Feminist History. Or French Medieval Poetry. Which means: almost no job prospects. They could also flunk out or drop out.
The lender has NO INKLING. They are not even allowed to ask, let alone discriminate. They cannot, for example, loan money to an A+ student, but refuse it to a C- minus student.
If you want lenders to loan six figure sums to teenagers, then they need protection from the very real threat that a lot of students would default on the loans, especially if bankruptcy was "easy" and popular.
It wasn't JUST doctors, but they typically have the highest college bills since they attend for long.
We are asking lenders to give loans to 17 year old teenagers, most of whom have never worked -- who have no money of their own -- who have no skills -- no assets -- and the lender has zero say-so about where the kid goes to school, what they study, if they are serious students or partying fools. A student might well borrow $180,000 to attend a "name" college, take an extra 2 years to graduate a 4 year program, and graduate with a degree in....Gender Studies. Or Feminist History. Or French Medieval Poetry. Which means: almost no job prospects. They could also flunk out or drop out.
The lender has NO INKLING. They are not even allowed to ask, let alone discriminate. They cannot, for example, loan money to an A+ student, but refuse it to a C- minus student.
If you want lenders to loan six figure sums to teenagers, then they need protection from the very real threat that a lot of students would default on the loans, especially if bankruptcy was "easy" and popular.
1
I don't want anyone thinking that this is a problem limited to sham online and storefront 'universities.'
All universities saw opportunity in the availability of federal loans and federally-insured Stafford loans to raise tuition and fees.
Esteemed private and public state universities are gouging their students too and have since 1988.
All universities saw opportunity in the availability of federal loans and federally-insured Stafford loans to raise tuition and fees.
Esteemed private and public state universities are gouging their students too and have since 1988.
40
My state's flagship university hired a former Republican political operative and "businessman who knew what it was like to make payroll in the private sector" as President a decade ago with no academic background who has since raised tuition and fees an average of about 10% per year...which middle class kids and parents have relied increasingly on the dreaded public sector socialist federal "govmint" to finance via student and parent loans. What a great country where a businessman can raise the price of his "product" 10% per year and stay in business.
3
As Calvin Coolidge said "They rented the money, didn't they? I feel like a fool paying my granddaughters tuition when if she had borrowed the money it would just be forgiven by the Democrats. What was it Bill Clinton said about playing by the rules?
6
That's right, Rich. What we're asking is that these lenders be covered by reasonable rules and then abide by them. Lucky you and your granddaughter that you could afford to pay her tuition. Lucky for society, too, because she can go out, find a job, buy stuff and pay taxes that benefit us all. Wouldn't it be great if every student could take out reasonable loans, that can be reasonably paid back so they have enough left over to start life when they graduate?
1
Where have you seen any indication of loans just being outright forgiven? In order to qualify for even the public service payoff, you have to work in the public sector for 10 years and make 120 qualifying payments. It is also highly likely that those in public service jobs are making much less than their counterparts.
You overlook too - or more likely, are unaware - the fact that some of these "servicers" provide horrible service, and are themselves unaware of the rules. My loan repayment under Sallie Mae was manageable, as I was working and my wife was in school, racking up her large loan. I became unemployed, my wife graduated and took a job, my loan was purchased by one of the big national "servicers, (Navient)" and my repayment, under the new income-based program, went up almost triple. I completed paperwork for being unemployed, having no income, although I wanted to continue with the previous payments as to not "break" my start on the the 10 year repayment agreement. Didn't work. Arguments about wife's income counting as mine ("ours"), but when I countered that if her income counts for me, then her debt should count too. No, no, no; that didn't work for them. Makes absolutely no sense, that.
So I consolidated with another company and thus far (knock on wood), things have been fine. And I have been paying what I originally paid.
So I consolidated with another company and thus far (knock on wood), things have been fine. And I have been paying what I originally paid.
2
Thank you for this article. I would also like to point out that structuring services are not available to those who are already in default, because that is an important piece of the puzzle. Even if you are making your payments by the skin of your teeth, you are better off than those who literally could not afford to pay and have defaulted, and in my opinion they are the ones who need the most help. Unfortunately, this option is entirely closed to them. What a system!
9
It would help readers if the NYT would report on what the CFPB is actually doing rather than stating what the agency should do. In its first couple years of existence, the agency focused more on the mortgage market due to the many homeowners who were foreclosed on during and after the recession. The large banks and mortgage servicers are now much more cautious in foreclosing on people and more likely to offer loan modifications where people struggle to make payments.
The agency has examined more student loan servicers over the past couple years. Is the NYT not aware of the public enforcement action against Discover, announced just a couple months ago? The agency is already taking action against unfair, deceptive, and abusive practices by the student loan servicing industry. In addition, the agency has limited resources and cannot examine every institution under its purview on a continuous basis.
This is one of several articles and especially editorials I have seen in the NYT where the author is uninformed on the subject matter.
The agency has examined more student loan servicers over the past couple years. Is the NYT not aware of the public enforcement action against Discover, announced just a couple months ago? The agency is already taking action against unfair, deceptive, and abusive practices by the student loan servicing industry. In addition, the agency has limited resources and cannot examine every institution under its purview on a continuous basis.
This is one of several articles and especially editorials I have seen in the NYT where the author is uninformed on the subject matter.
7
"In some cases, borrowers reported, servicers chose to apply a larger portion of a borrower’s monthly payment to his or her low-interest loan, deliberately leaving the high-interest loan with a larger balance."
Nelnet did exactly this when I used a graduation gift to pay off some debt -- they applied it all to a 2 percent undergraduate loan instead of 8 percent graduate loans.
I don't blame Nelnet, though -- Nelnet is an evil corporation doing its job to make money for shareholders.
I do blame the Department of Education -- and my government -- for allowing a for-profit corporation to hold my life hostage.
Shame on America.
Nelnet did exactly this when I used a graduation gift to pay off some debt -- they applied it all to a 2 percent undergraduate loan instead of 8 percent graduate loans.
I don't blame Nelnet, though -- Nelnet is an evil corporation doing its job to make money for shareholders.
I do blame the Department of Education -- and my government -- for allowing a for-profit corporation to hold my life hostage.
Shame on America.
17
One must consider the expense now of attending college or university. How much of the extreme inflation of college costs has come due to the ridiculous focus on college sports? Colleges shouldn't be in the sports business. If the professional sports teams really need training grounds to find them the best candidates for their teams, then they need to fund the entirety of college athletics.
I don't like the obscene amounts of money some colleges spend on sports, either. But they spend it on "income-producing" sports and those sports bring in HUGE dollars to the colleges. It is not, in fact, taking away money from the schools.
1
It just makes me wonder why I and millions of others have paid back our student loans. Can it be that only fools actually pay their debts?
13
I didn't see anything in the article stating that borrowers should not repay their loans. Did you read it? It stated that borrowers would have been less likely to default if they had been allowed to make income-based repayments as allowed under the law.
1
Tony - if you read the article, it states that many borrowers are defaulting because servicers are not allowing them to make income-based payments, which the laws requires. If they made lower payments until their careers progressed and they made higher incomes, then there would be fewer defaults and people would pay what they owe. How hard is that to understand?
1
My advice? As a public interest attorney serving low-income families and currently repaying $225,000 in debt under Pay As You Earn, I would default new graduates into Pay As You Earn or Income Based Repayment, whichever has the lowest payment for which they qualify, allowing them to opt into standard repayment only if their income will allow them to afford it.
Cap interest rates at a sensible level. Some of my loans have interest rates over 7.9%, which means that my loans have grown to $273,000 in three years, even though I have never missed a payment, because my income was very low during my fellowship years and I couldn't come close to even covering the interest under my repayment plan.
Lastly, the government should allow for partial public service loan forgiveness. Under the present program, students must work for 10 years and make 120 qualifying payments while in a nonprofit or public service job, and then they will see full forgiveness of what they still owe. I have seven years to go. But in this era of job instability, why not give partial credit for years served? Could the government not forgive 30% of debt for a graduate who has served for three years in a public service role? This would be encourage public service among those who perhaps cannot commit to a full ten years.
Cap interest rates at a sensible level. Some of my loans have interest rates over 7.9%, which means that my loans have grown to $273,000 in three years, even though I have never missed a payment, because my income was very low during my fellowship years and I couldn't come close to even covering the interest under my repayment plan.
Lastly, the government should allow for partial public service loan forgiveness. Under the present program, students must work for 10 years and make 120 qualifying payments while in a nonprofit or public service job, and then they will see full forgiveness of what they still owe. I have seven years to go. But in this era of job instability, why not give partial credit for years served? Could the government not forgive 30% of debt for a graduate who has served for three years in a public service role? This would be encourage public service among those who perhaps cannot commit to a full ten years.
24
"This would be encourage public service among those who perhaps cannot commit to a full ten years.."
I agreed with everything you said until I got to this last sentence. It's not that people don't want to 'commit' to 10 years in public service. Obtaining a public interest job is close to impossible. It has become a cartel of 'who knows who', cutting off the new graduates looking to get in. That's why most of us end up in the private sector; not because of better pay, but because the doors where shut on our faces when we tried to pursue public interest careers.
I agreed with everything you said until I got to this last sentence. It's not that people don't want to 'commit' to 10 years in public service. Obtaining a public interest job is close to impossible. It has become a cartel of 'who knows who', cutting off the new graduates looking to get in. That's why most of us end up in the private sector; not because of better pay, but because the doors where shut on our faces when we tried to pursue public interest careers.
If Mr. Duncan paid more attention to this real educational problem, and less attention to his manufactured crisis in public schooling, we would could have avoided the next coming too big too fail crisis.
1
It seems to be lost in the shuffle that students themselves bear much of the blame for what is, in some cases, unquestionably financial irresponsibility. Take for example a young person i know who borrowed heavily to attend a very prestigious university. She could not otherwise afford the cost without debt. But her ultimate career goal was social services, a notoriously low-paying job. She now has debt in the six figures, which is more than double (approaching triple) her current income. That is simply not responsible. I don't begrudge young people seeking education at a prestigious college or seeking employment in a field that is beneficial to society. But when the cost-benefit component has to be balanced.
8
You say "a field that is beneficial to society" to critique someone going into social services... I'm not really sure what your priorities are for society. For someone to have to take on debt to pursue a career in social services should be a signal that something is wrong with the system, not with the person.
3
Who advised this young person? She was only 18 when she took out her first student loan.
Bob - This story is not about students simply incurring debt. Student loan servicers are breaking the law by telling borrowers that they cannot make income-based payments. This is a deceptive and abusive practice in violation of 12 USC 5531(a) and 5536(a)(1)(B).
1
Back to the future. Nearly 30 years ago we could have written the comments below. Student debt service arrangements make loan sharks look reputable. It took our US Senator to rescue us then (from a company that ultimately had managers imprisoned for their 'efforts' on students' behalf). Why not let students borrow from the govt and payback based on their AGI each year? If students default, well heck, the Chinese will be holding the paper. Let 'em collect.
12
I too have seen Navient/Sallie Mae and Discover do CRAZY things with my loans. This includes stating that one of my loans is floating rate (which it's not) and applying larger payments to loans with lower interest rates.
38
Lauren - The CFPB announced a public enforcement action against Discover just a couple months ago. If you still have loans that are serviced by Discover, the servicing process should improve.
Instead of waiting until student borrowers are treading shark infested waters while being hounded by sinister Payday type loan companies with strong lobbying ties to politicians, why not pressure Congress to rehabilitate the entire educational process. First, eliminate any for profit Universities that don't have strict admission standards similar to any credentialed & well regulated state University. Most of the Republican backed for profit sham schools have no admissions policies at all yet offer federal funds for expensive tuition & living expenses to students are are so low functioning that they're unable to complete an application independently let alone entrusted with completing a competitive education & landing a job which will provide them with the salary to repay over inflated student debt. State run Universities require, at a minimum, SAT minimum scores to qualify for admittance as well as a solid high school or community college academic record that reflects a pattern of academic responsibility, maturity & the mental aptitude for achievement. If a student is mentally, socially, psychologically or emotionally unqualified for college don't lure them in to a position where they are set up to fail. There are many other alternatives for people who aren't qualified for college including vocational training at low cost community colleges or Non profit organizations although GOP politicians would lose their big for profit & student loan company campaign contributors.
53
It is funny you lay this at the feet of the GOP. Fact check yourself. It is the democrats who have made this easy money so readily available for higher education. The less apt you are to have the financial background and skills to handle the obligation the more money the democrats want to lend you. Students are being told to reach for the stars and they should have to worry about the costs as they pursue their dreams. Is it unfair that kids grow up in a variety of different economic circumstances ? Sure but they need to learn to deal with it early or they will deal with it forever.
Gee, I've never heard of of Republican ties to any for-profit universities. I have heard of Democrats who believe that EVERYONE should have a college education, regardless of ability or qualifications.
Simply, they are not an effective voting block to influence the crooked politicians and banks in Washington. The need to form a Political Action Committee and donate tons of money to the politicians who will then forgive them their loans.
15
Student loan companies are not "failing" borrowers. They're intentionally obfuscating, mismanaging information, or flat-out lying to borrowers in order to keep them trapped in debt bondage forever. Go ahead and look up the consumer reports of any major debt servicing company. They are filled with tales of grift and harassment; companies that just happen to "lose" huge amounts of money paid towards a principal or that conveniently forget about payment plans in which their borrower participates. In the meantime, these companies can sell massive debts to one another at pennies on the dollar, while charging interest rates that break the orbit of our now permanent zero interest rate policy.
We are way past the point of effete "oversight." These deadbeat companies should be nationalized, their assets should be redistributed to the borrowers that they have defrauded, and their execs should stand trial. Or, we can wait for this problem to manifest itself, once again, in the streets.
We are way past the point of effete "oversight." These deadbeat companies should be nationalized, their assets should be redistributed to the borrowers that they have defrauded, and their execs should stand trial. Or, we can wait for this problem to manifest itself, once again, in the streets.
155
I don't understand. Is the article saying that we need more government regulation? How can that be?
3
Any entity that defrauds and cheats it's consumer, particularly with government funding certainly needs more oversight - or as you put it regulation.
13
The article is stating that the CFPB should start "suing companies." The NYT is behind here on what's happening and the author is very uninformed. For example, the CFPB announced a public enforcement action against Discover a couple months ago for its student lending practices. In addition, the agency is now examining more student loan servicers; it initially focused on the mortgage market because that contributed to the financial crisis.
2
No let's just continue to let the loan servicing companies take advantage of students.
10
The decent thing to do would be to forgive most of all student debt now and offer realistic repaiement plans for the rest or the possibility of bancrupcy.
27
You ready to write that $1 trillion check to forgive the debt?
3
'Decent' for who?
The taxpayers who would have to pay for it?
And then what? The next generation of unqualified students does the same thing, which is to borrow insane amounts of money to pursue degrees in fields where there were no jobs even 40 years ago, knowing someone else will pay it off?
In which case, why stop at $25,000? Why not $250,000 if everything is 'free'?
The interest rates should be renegotiated to match the prime rate, but if bad behavior is rewarded, we will only get more of it.
The taxpayers who would have to pay for it?
And then what? The next generation of unqualified students does the same thing, which is to borrow insane amounts of money to pursue degrees in fields where there were no jobs even 40 years ago, knowing someone else will pay it off?
In which case, why stop at $25,000? Why not $250,000 if everything is 'free'?
The interest rates should be renegotiated to match the prime rate, but if bad behavior is rewarded, we will only get more of it.
2
Student loans need to be dischargeable in bankruptcy. Corporations dump their debts. (Ask Trump.)
129
Student loans dischargeable via bankruptcy would deliver the wealth of the parents as "reachable assets". Most parents are co-signers on student loans - no bank, not even the Federal government, will loan to a teenager who has no proven ability to pay it back.
Be careful what you wish for. It seems you want to blast Trump more than come up with an actual solution.
Be careful what you wish for. It seems you want to blast Trump more than come up with an actual solution.
Corporations are not people. And money is not speech. Students are people. Debtors are speaking. But neither students nor debtors have the clout to afford lobbyist to buy legislative nor executive relief. The innate corrupt crony capitalist corporate plutocrat oligarchy that lies at the root of this injustice needs to be corrected. Wall Street gets bailed out. Main Street gets dumped on.
That this is legal but immoral and inhumane points to the heart of the problem problem. This is straight out of Charles Dickens world of fiction. Most memorably set forth in his "Oliver Twist"
"If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is an ass--a idiot. If that's the law, the law is a bachelor; and the worst I wish the law is, that his eye be opened by experience--by experience."
See also Matthew 25:31-46.
That this is legal but immoral and inhumane points to the heart of the problem problem. This is straight out of Charles Dickens world of fiction. Most memorably set forth in his "Oliver Twist"
"If the law supposes that," said Mr. Bumble, squeezing his hat emphatically in both hands, "the law is an ass--a idiot. If that's the law, the law is a bachelor; and the worst I wish the law is, that his eye be opened by experience--by experience."
See also Matthew 25:31-46.
18
Tell me again how often Donald Trump has filed for bankruptcy.
What we do to students trying to get an education in this country is criminal: massive debt, little or no recourse, tuition that outpaces inflation...
What we do to students trying to get an education in this country is criminal: massive debt, little or no recourse, tuition that outpaces inflation...
257
Perhaps upon graduating, one should incorporate and claim bankruptcy? Hmmm...
I'm no fan of Trump but facts matter. He has never filed for personal bankruptcy. Companies he controls have filed or otherwise be reorganized.
2
So far, we have avoided student loan debt for our daughter. She is taking classes at the local community college, she lives at home, we buy books online for a fraction of the cost of new books, and we pay cash for the tuition.
When she has the first 2 years of basic classes behind her, then she will apply to the school of choice and get her undergrad degree.
I feel sorry for the universities and the book sellers and the loan sharks, but that's the way it is. Everyone should consider this option, and maybe the system will react.
When she has the first 2 years of basic classes behind her, then she will apply to the school of choice and get her undergrad degree.
I feel sorry for the universities and the book sellers and the loan sharks, but that's the way it is. Everyone should consider this option, and maybe the system will react.
The situation you describe here sounds eerily reminiscent to how banks treated those homeowners facing foreclosure. They lenders receive federal funds in some form and still operate like thugs. Shameful.
71
The simple fact that student loans cannot be dismissed in a Bankruptcy procedure tells you that they are rigged from start to finish, whomever got that inserted into the law is the greatest lobbyist in the world, a win win for lenders, a loose loose loose for anyone borrowing.
Who says 16th century servitude died in the 16th century....
Who says 16th century servitude died in the 16th century....
106
Everyone would just go to college, build up debt, immediately file for bankruptcy upon graduation (creditors receive zero since most recent graduates have no assets anyway)...that would last about 8 seconds until banks, lenders and the gov't stopped making the initial loans to students...effectively grinding payment for education to a halt
2
Let's see . . . .
Kids with money go to school and their parents just pay (these are known as the 1% and are ALL of the kids whose parents are in our Congress)
Kids from the upper middle and downward come from families that are working hard, but can't take the crazy rates now charged to go to even state colleges.
The fed loans the money to the bank at, yes, almost 0%, this is to "help" our economy. The banks turn around and use deceptive practices to loan the money out at 4% to 30% (formally called loan sharking and resulting, at it's top rate, a profit margin around 3000%).
In a desparate attempt to get their kids up the ladder a bit more, middle class parents and kids are given outsized loans that will obviously be more than the takers can repay in at least 30 years, and then the banks, these same profitieers mentioned above, cover the loans with so much legal mumbo jumbo that the payer doesn't even know that he/she can get lower rates, and the bank doesn't advise them as such.
This, I suppose, would be too much service level, even for an institution that is on corporate welfare (the charity interest rate, remember?) and basically pushing our middle class down the ladder.
Now, do I have this right?
Kids with money go to school and their parents just pay (these are known as the 1% and are ALL of the kids whose parents are in our Congress)
Kids from the upper middle and downward come from families that are working hard, but can't take the crazy rates now charged to go to even state colleges.
The fed loans the money to the bank at, yes, almost 0%, this is to "help" our economy. The banks turn around and use deceptive practices to loan the money out at 4% to 30% (formally called loan sharking and resulting, at it's top rate, a profit margin around 3000%).
In a desparate attempt to get their kids up the ladder a bit more, middle class parents and kids are given outsized loans that will obviously be more than the takers can repay in at least 30 years, and then the banks, these same profitieers mentioned above, cover the loans with so much legal mumbo jumbo that the payer doesn't even know that he/she can get lower rates, and the bank doesn't advise them as such.
This, I suppose, would be too much service level, even for an institution that is on corporate welfare (the charity interest rate, remember?) and basically pushing our middle class down the ladder.
Now, do I have this right?
85
No, actually you don't.
The Federal government dictates to banks what the interest rate on government-guaranteed student loans will be. It's not "30%".
If there were no such Federal government Wish that more students could be given more taxpayer dollars to go to college, banks would be more free (not completely free) to determine on a case-by-case basis how much $ a teenager can borrow and how much interest the teenager should pay. This could be determined by having the bank look at the teenager's school transcripts, the assets of the parents, any gifts, and what the teenager's choice of school and academic program suggested about the teen's earnings potential and ability to pay back the loan.
But that's not how the Liberal/Progressive/EveryoneShouldGoToCollege policies of the Federal government operate.
The Federal government dictates to banks what the interest rate on government-guaranteed student loans will be. It's not "30%".
If there were no such Federal government Wish that more students could be given more taxpayer dollars to go to college, banks would be more free (not completely free) to determine on a case-by-case basis how much $ a teenager can borrow and how much interest the teenager should pay. This could be determined by having the bank look at the teenager's school transcripts, the assets of the parents, any gifts, and what the teenager's choice of school and academic program suggested about the teen's earnings potential and ability to pay back the loan.
But that's not how the Liberal/Progressive/EveryoneShouldGoToCollege policies of the Federal government operate.
That's right. But take it a step further, because the value of a college degree has been diluted to a point such that a graduate degree is encouraged in order to maximize one's chances for what formerly qualified as a middle class lifestyle.
Colleges and universities have increased the tuition at an astounding rate. Tuition for 4-year degrees at some schools is over $50,000 per year, and with fees and other expenses, students are incurring in excess of $60,000 per year of debt. Columbia Law School publishes a recommended amount to borrow to cover the cost of tuition, fees and other expenses. For 2015, that amount is $88,530 per year. So it is now possible for someone to incur non-dischargeable debt in excess of $450,000 for a 4-year degree and a JD.
Most schools are "not-for-profit," which obligates them only to spend all of this money through an expansion of administrations, brochure-fodder amenities and pay packages for professors and administrators. For their trouble, they are not taxed.
How will this all end? The baby boomer generation should be deeply ashamed that the roots of this and other systems grew under their leadership. Subsequent generations are left to deal with a rigged political and financial system, long-term debt servitude and a social safety net hurtling toward insolvency. Don't get me wrong, though - I do so enthusiastically read articles regarding where boomers are buying second/third homes to enjoy their golden years.
Colleges and universities have increased the tuition at an astounding rate. Tuition for 4-year degrees at some schools is over $50,000 per year, and with fees and other expenses, students are incurring in excess of $60,000 per year of debt. Columbia Law School publishes a recommended amount to borrow to cover the cost of tuition, fees and other expenses. For 2015, that amount is $88,530 per year. So it is now possible for someone to incur non-dischargeable debt in excess of $450,000 for a 4-year degree and a JD.
Most schools are "not-for-profit," which obligates them only to spend all of this money through an expansion of administrations, brochure-fodder amenities and pay packages for professors and administrators. For their trouble, they are not taxed.
How will this all end? The baby boomer generation should be deeply ashamed that the roots of this and other systems grew under their leadership. Subsequent generations are left to deal with a rigged political and financial system, long-term debt servitude and a social safety net hurtling toward insolvency. Don't get me wrong, though - I do so enthusiastically read articles regarding where boomers are buying second/third homes to enjoy their golden years.
I have an issue with this topic. Why are students being allowed to apply for student loans when they have no intention of paying them off? Why don't they sit down with a family planner and figure out the best possible scenario?
I spent 3 years in a JC because I was not going to get tied into something that would haunt me for years. And I believe that the impression is you get less of an education going to a junior college which is not true. We lived a pauper's existence until I graduated for the very reason of this column
Another factor to be considered is that over 70% of college students change their major at least twice. That decision extends the time frame for graduating and adds more to the total. They should have to live with that decision.
I believe another problem is lenders are far too eager to lend to those who do not have the financial wherewithal to be able to pay them back. I fault the lenders for intentionally masking the reality of the process to make a profit.
I would ask the board. Do we help people who are being foreclosed? Do we rescue them? And what does that teach students? You can accrue debt and walk away? Will we allow people to walk away from credit card debt? Mortgages?
There was a front page article recently where the author recommended that students take out loans with no intention of paying them back. That is irresponsible. We have $1.2 trillion in debt. Will that just disappear? No, I will for it. Why should I suffer for their decision?
I spent 3 years in a JC because I was not going to get tied into something that would haunt me for years. And I believe that the impression is you get less of an education going to a junior college which is not true. We lived a pauper's existence until I graduated for the very reason of this column
Another factor to be considered is that over 70% of college students change their major at least twice. That decision extends the time frame for graduating and adds more to the total. They should have to live with that decision.
I believe another problem is lenders are far too eager to lend to those who do not have the financial wherewithal to be able to pay them back. I fault the lenders for intentionally masking the reality of the process to make a profit.
I would ask the board. Do we help people who are being foreclosed? Do we rescue them? And what does that teach students? You can accrue debt and walk away? Will we allow people to walk away from credit card debt? Mortgages?
There was a front page article recently where the author recommended that students take out loans with no intention of paying them back. That is irresponsible. We have $1.2 trillion in debt. Will that just disappear? No, I will for it. Why should I suffer for their decision?
4
But Big Business walks away from debt all the time.
The repayment system should probably be tweaked but these student debtors should still have some skin in the game. They took on the debt with no guarantees of great jobs and it's not the taxpayers' job to bail them out. While the financial industry is replete with bad actors, two wrongs don't make a right and I am against letting these debtors off the hook. Moral hazard cuts both ways.
24
The students are taxpayers, too! We all are and we live in this thing called a society. Would you really be ok in a country that just allowed itself to go into financial ruin just to teach others a lesson?? You should be angered by the ever-rising, unregulated cost of tuition. Rather than blaming students for not being millionaires, how about acknowledging that when so many of your fellow citizens are having problems, there must actually be a problem and that it will one day affect you, too??
Although I agree that loan servicing is part of the problem, this article skirts around the issue of the much bigger problem regarding student loans: high interest rates. In this age of super low interest rates, why are there still student loans with 6, 7 and 8 percent interest rates?
I know many people who work full time, worked hard to get their degree, and can see no way to ever repay their loans because the loans keep growing due to the high interest on them.
Until we have student loan reform, and the ability to truly refinance student loans, attacking the servicing companies is a cosmetic solution at best.
I know many people who work full time, worked hard to get their degree, and can see no way to ever repay their loans because the loans keep growing due to the high interest on them.
Until we have student loan reform, and the ability to truly refinance student loans, attacking the servicing companies is a cosmetic solution at best.
81
Rates are 6,7,8% because the lenders have to be compensated for the other borrowers that decide to default and not pay their loans.
Your point is well taken. Especially considering these loans cannot be discharged in bankruptcy. Although I am sure the lenders will tell you they would not lend to this group at anything less than credit card rates if the guarantees didn't exist. The other thing I resent is the need based financial aid. If you worked at saving for a child's college, the savings are used to lower the amount of any grants the child qualifies for. Their should be a system that looks at earnings and rewards families for driving the used cars and taking fiscally responsible vacations so they can fund the college savings account. Finally the suggestion by college financial aid offices that parents co-sign student loans and put their homes up as collateral makes me nuts.
This outsourcing has to stop; the government should administer servicing. No bonuses, just a job. Reagan was wrong; government has an essential roll.
50
This is why regulations and oversight are necessary. Given the opportunity, too many companies take advantage, if not out right rip off their customers.
20
"I am from a private company and I am here to help." Sounds stupid doesn't it? We should get over our knee jerk reactions and realize that there are things that government does well and things that private businesses do well. Loan servicing seems to be something that a business could do well. Policing the failure to do it well is something that government could do well. A few large penalties should straighten this out.
73
It is private loan companies who are servicing the debt, and gaining incredible fees off of loaning the government's money. Why should they get rich, and they have, off of loaning the taxpayer's money? With predatory practices and fee structures.
"A few large penalties should straighten this out."
http://www.consumerfinance.gov/newsroom/cfpb-orders-discover-bank-to-pay...
http://www.consumerfinance.gov/newsroom/cfpb-orders-discover-bank-to-pay...
Or we could stop privatizing every government function. The DoE should be handling these student loans, not some for-profit corporation.
54
Anyone with a student loan should visit the National Consumer Law Center's advice website for student loans: studentloanborrowerassistance.org. It is the most comprehensive and unbiased source of legal advice on how to manage your student loans, whether federal or private.
32
So basically it is discovered that the loan servicers have been defrauding millions of vulnerable people out of millions of dollars for years! OK, at this point, how many of us here actually expect that someone will actually be punished for these misdeeds? The answer is no one. Punishments are for the little people.
218
Another article showing that the banking industry makes its profits not by investing in society, but by being a parasite of society. Worse, our political leaders continue to enable, if not reward, this behavior.
277
Your argument sounds great at an occupy wall street meeting. But these "parasites" as you call them gave money to these debtors. Life is tough. The people should pay the money back at the terms THEY agreed upon. This notion that they should be bailed out is absurd. And before you bring up TARP and the auto bailouts, my position is corporations shouldn't be bailed out either.
While the bankers may not invest in society, they do invest in campaign donations and SuperPACs. The fact that "political leaders continue to enable, if not reward" the behavior you call parasitism is proof that those investments yield an excellent return for executives and shareholders of banks.
I'm afraid I just don't know what we, as ordinary voters without donation bundlers and SuperPACs, can do to fix this "One Dollar, One Vote" corruption of the democratic process.
I'm afraid I just don't know what we, as ordinary voters without donation bundlers and SuperPACs, can do to fix this "One Dollar, One Vote" corruption of the democratic process.
The Government could also remove loan servicers from the program and transfer their existing loans to other servicers if they don't comply with the rules. Just the threat of this should be sufficient. If that does not work, removing their ability to service new loans for a year should help. If that fails, totally remove them from the program.
2
Our society has become like Dickensian England, with banks and corporations eager to prey on the poorest and most vulnerable members of society -- while they purchase stay-out-of-jail protection from politicians.
48
I frankly do not understand why we tolerate a tuition financing system that even allows students to be treated differently. Almost every one of these loans was initiated in a college financial aid office. Where is their responsibility to protect their students from predatory lending? Why isn't their one financing system that provides every student the money they need on the same terms? Moreover, colleges should see their vested interest in protecting their students from predatory lending because every graduate is a potential lifetime donor - but only if they have disposable income to donate and they see a relationship between their education and their income.
166
Student financial aid offices have a huge conflict of interest...they are paid by the college that benefits from students having loans...the very loans they are encouraging students to take on. Should be illegal for them to be involved in the process. We need unbiased third parties not involved in the lending business to provide free/low cost information about the loan they are considering. HUD funds non-profit counseling agencies to provide this service to first-time homebuyers. Seems the same process should be offered for student loans
1
Steve725: the parameters of these loans and their lifetime tether that cannot be escaped was determined by Republicans in Congress when the laws were written. My libertarian friend argued for the rigidity of these rules so that people couldn't borrow and then escape responsibility (with no proof that they ever had done this.) I argued that the rules were punitive and far harsher than those for businesses and would be destructive of the individuals and the nation. It is no consolation to me that I was right and he was wrong. Worse yet, the people who agree with his position and with Republicans still don't see how wrong the rules are even though it is often their own children who are caught in this debt trap. Incredibly, they are so ill-informed they blame Democrats.
"I frankly do not understand why we tolerate a tuition financing system that even allows students to be treated differently."
I could not agree more. What we need is a college financing system that operates like every other financing system and takes into account who is most likely to pay the loans back. Get the feds out of the business of backing them up and make new loans dischargeable in bankruptcy. And watch how quickly so many of the student loan problems go away, as people will take out less loans and college costs will go down.
I could not agree more. What we need is a college financing system that operates like every other financing system and takes into account who is most likely to pay the loans back. Get the feds out of the business of backing them up and make new loans dischargeable in bankruptcy. And watch how quickly so many of the student loan problems go away, as people will take out less loans and college costs will go down.
What I find troubling is the governments actions every time I try to settle this debt. Unlike the bad corporate actors who almost ruined this country back in 2008 I have made countless offers to settle my debt. Each time the government response is to attempt to garnish my wages. As there isn't much to go around they ultimately fail. It would be better for the country and myself if they would just take what they can get assuming what is offered matches the original amounted borrowed.
44
Civil law suits will only go so far to rein in greedy, rapacious "loan servicing" companies. It's not "bad customer service" it's fraud. Don't just sue the companies sue the CEOs who make the decisions to defraud debtors and take money from the government under false pretenses... prosecute a few and send them to jail. Privatizing government programs makes them cost more and rarely results in humans getting any relief.
20
America only works when most of the people most of the time abide by the rules. The student loan system is in disarray because the lenders are not. We can not investigate, prosecute and punish all law violaters in every facet of social and commercial interaction. The student loan debacle is only one example of the corruption that pervades America. I have always been optimistic about the future of our amply endowed country but my optimism is on the wane.
4
In general, I believe we should fully pay for our own college education through the income boost it is expected to produce. The education does get paid for via the loans, and if the student does not pay them back, others are unfairly forced pay for their education choices.
"could have benefited from income-driven repayment plans".
If you need an income driven repayment plan, or any plan where you do not fully repay the value of your loan with the agreed upon interest, then perhaps you picked the wrong field. The rest of us should not be forced to pay for someone pursuing their passion and ignoring practicality.
In short, pay for your own education choice. If you must be public ally subsidized, choose a state or community college. If you choose a loan, play it back.
John
"could have benefited from income-driven repayment plans".
If you need an income driven repayment plan, or any plan where you do not fully repay the value of your loan with the agreed upon interest, then perhaps you picked the wrong field. The rest of us should not be forced to pay for someone pursuing their passion and ignoring practicality.
In short, pay for your own education choice. If you must be public ally subsidized, choose a state or community college. If you choose a loan, play it back.
John
3
You are oversimplifying the topic. Simply pay back does not address the main issue, which is that high interest rates are applied to debtors. It is true that the money is not at risk, because you can't eliminate the debt through Bankruptcy. So why such hogh interest rates. Would you tell peopel who lost their homes during the 2008 financial crisis, Pay your debt? And what so you have to say, Mr. Moral Compass, about the giant corporations that got bailed out with tax payers money for their irresponsible behavior, sending the world economy to hell.
You can pretend to be better than evwryone else all you want, the main issue here is greed, oppression of the middle class and a country driving itself to ruin. Judging by your comment I can guess you are voting for Donald Trump in the coming elections.
You can pretend to be better than evwryone else all you want, the main issue here is greed, oppression of the middle class and a country driving itself to ruin. Judging by your comment I can guess you are voting for Donald Trump in the coming elections.
Being able to delay or restructure the student debts (and promoting it) would be great. But why not go farther, as some of these debts will shackle these people for a life time, making them "slaves" to this mountain of debt. I would like to see some kind of forgiveness program that would wipe out the debt or at least a large portion of it. We need these people to become home owners, buying refrigerators, cars, etc. Because if they are not buying these items, we all suffer in the end.
119
And just who is to say that these same people will not then default on their mortgagees and the credit card they used to buy that refrigerator or that car loan?
Why should their debts be forgiven? Mine never have been and shouldn't have. They're only "slaves" to a mountain of debt if they chose to take this on and it turned out to be a VERY bad decision. Most of the debt is from people who never received their degree, and who were attending one of the worthless for-profit "colleges".
One needs to think very hard before taking on ANY debt. Youth is no excuse. I have a cousin who is 61 years old. At age 51, she decided to go back to college and get her degree - took her 3 yrs - and then get her masters. She then took a very low-paying teaching job, teaching ESL. She owed $60,000. There is no possible way she will be able to pay this back before she retires! She will be paying back student loans out of her Social Security. Yes, it's lovely that she tried to better herself, but sometimes that ship has sailed, and taking on that kind of debt in order to have a job that doesn't pay very well (she is in a southern state with very low pay for teachers), is financial madness.
But this is not something the federal government needs to fix. Yes, I feel sorry for my cousin. If I were a fabulously wealthy woman, I would pay off her student loans for her, but alas, I am not. Poor choices are NOT the responsibility of the federal government or the taxpayers.
Why should their debts be forgiven? Mine never have been and shouldn't have. They're only "slaves" to a mountain of debt if they chose to take this on and it turned out to be a VERY bad decision. Most of the debt is from people who never received their degree, and who were attending one of the worthless for-profit "colleges".
One needs to think very hard before taking on ANY debt. Youth is no excuse. I have a cousin who is 61 years old. At age 51, she decided to go back to college and get her degree - took her 3 yrs - and then get her masters. She then took a very low-paying teaching job, teaching ESL. She owed $60,000. There is no possible way she will be able to pay this back before she retires! She will be paying back student loans out of her Social Security. Yes, it's lovely that she tried to better herself, but sometimes that ship has sailed, and taking on that kind of debt in order to have a job that doesn't pay very well (she is in a southern state with very low pay for teachers), is financial madness.
But this is not something the federal government needs to fix. Yes, I feel sorry for my cousin. If I were a fabulously wealthy woman, I would pay off her student loans for her, but alas, I am not. Poor choices are NOT the responsibility of the federal government or the taxpayers.
3
'...We need these people to become home owners, buying refrigerators, cars, etc...'
They will default on those loans too.
They will default on those loans too.
3
Many of "these people" have never had to be responsible for anything, let alone debt. Being bailed out becomes a way of life as if they are entitled to their degrees, their apartments, their phones, their computers, their cars-- even their jobs. Many hold back from taking a job and moving back in with their bailiffs (parents, relatives, like-minded friends) until they get the perfect job offer at the salary they expect.
I personally don't care if they are able buy refrigerators, tvs, houses, condos, cars, etc. (most likely on credit) until they grow up and stop acting like the world owes them something just because they are of a certain generation.
I live an area with multiple colleges and universities. To get an idea of what I'm talking about, just go to any apartment dumpster or curbside at the end of a semester. It's amazing, absurd and irresponsible what gets thrown away backed up with the mentality that some source will replace it at their whims.
I am, embarrassingly, related to several of these types.
I personally don't care if they are able buy refrigerators, tvs, houses, condos, cars, etc. (most likely on credit) until they grow up and stop acting like the world owes them something just because they are of a certain generation.
I live an area with multiple colleges and universities. To get an idea of what I'm talking about, just go to any apartment dumpster or curbside at the end of a semester. It's amazing, absurd and irresponsible what gets thrown away backed up with the mentality that some source will replace it at their whims.
I am, embarrassingly, related to several of these types.
2
Make higher education free and this thievery ends. Some nations even offer free education for certain degrees even to international students because they understand the value that those courses of study offer to the rest of the world and to their respective countries.
Monetarily speaking, if average college graduates' earnings are considerably higher than high school graduates', the average college grad is paying more in taxes for the rest of his or her working life. This means that they are indirectly paying for the education originally subsidized by the state (and then some) via taxation at the federal and state level.
It guess you could (somewhat ironically) call it a no-brainer.
Monetarily speaking, if average college graduates' earnings are considerably higher than high school graduates', the average college grad is paying more in taxes for the rest of his or her working life. This means that they are indirectly paying for the education originally subsidized by the state (and then some) via taxation at the federal and state level.
It guess you could (somewhat ironically) call it a no-brainer.
10
In those countries, only the top 10-20% attend college based upon merit.
If that was tried in the US, the cries of "DISPARATE IMPACT" would reverberate very quickly as some groups do very well on merit to the detriment of others.
If that was tried in the US, the cries of "DISPARATE IMPACT" would reverberate very quickly as some groups do very well on merit to the detriment of others.
1
Many of the seven million federal (guaranteed or direct) borrowers in default entered into default and the post-default collections process many years or even decades ago. Income driven plans weren't around or, at most, only a very early version available to few borrs. For the completely private education loans, it is difficult to say how many have defaulted, as, like other private consumer debts, are often charged off after they are a few months past-due; even more recent private education loan borrowers aren't eligible for income-driven repayment, and can't consolidate into federal direct. The issue about applying a larger portion of a borrower’s monthly payment to his or her high-interest loan, again, relates primarily to private education loans. Application of payment to federal loan balances is unfortunately prescriptively laid out under longstanding regulations. Regulations can be changed, of course, and it sounds like that process has already begun, but historically servicers and borrowers were in a position of leaving the other loan(s) delinquent by following such instructions. And no one wants to go back to the days in the 1980s when many borrowers received separate bills, or non-serialized bills, for each loan (could be eight loans for a borrower who attended college for four years). As far as interest rate break for timely payments, Congress repealed this for federal loans four years ago, although some earlier borrowers may still be working on qualifying.
1
The magic words are the more they collect over the longest time the more money these companies make. These companies are debt collectors pure and simple. The question is what is the result that was intended, squeezing every student loan debtor dry or assisting them to avoid default while paining what their income allows without being driven into debt poverty by what are becoming loan sharks.
One remedy is recognize that on government guaranteed student loans issued by banks are not risking their own money and interest and should be limited to 1 or 2% interest as a service fee. When a student defaults the government is on the hook; but draconian collection for private profit defeats the whole purpose of the student loan program which is to invest in the future of our young people. We would need fewer student loans if we had more tuition free public colleges and universities.
One remedy is recognize that on government guaranteed student loans issued by banks are not risking their own money and interest and should be limited to 1 or 2% interest as a service fee. When a student defaults the government is on the hook; but draconian collection for private profit defeats the whole purpose of the student loan program which is to invest in the future of our young people. We would need fewer student loans if we had more tuition free public colleges and universities.
12
An irony here is that many of those responsible for the sloppy work in the loan servicing industry are themselves college graduates. Just think about that for a moment. Young people are going deep, deep into debt in order to attend college, and when they arrive on campus, they discover that their universities are spending much of that borrowed money on just about everything except first-rate instruction, on just about anything except classroom teaching that hews to the highest standards and that demands from students a corresponding commitment to excellence. Doubt me? According to ProPublica's "Debt by Degrees," Princeton University spends almost $50,000 every year on instruction for each of its undergraduates. By contrast, I'm teaching this semester as a part-time instructor at a large public university with an annual budget of almost $1 billion, and it is spending a bit more than $7,000 per capita on instruction. My students talk to me about professors "who just don't give a damn." All that to say that this infuriating aspect of contemporary higher education is symptomatic of a much, much larger problem. In too many ways and to a significant degree, higher education today is broken, fundamentally broken. It will soon be time, if it is not already, to let the handful of elite universities and colleges continue with the old model if they wish, while all the rest of us start over from scratch.
2
Even more helpful to people facing ruin from crushing student debt would be to allow them to seek relief by declaring bankruptcy if life circumstances make it impossible for them to repay all they owe.
Bankruptcy allows those who can't meet their financial obligations to be excused from repaying some or all of their debt. It has been in existence since ancient times.
In this country, the rules for filing bankruptcy are set by federal law.
Giant corporations and the rich can discharge their debts this way, as General Motors and Chrysler have done in the past.
However, federal law prohibits student loans from being wiped out in bankruptcy.
Why?
Because in 2005 the United States Congress, in response to demands from the Consumer Bankers Association, the lending industry's main trade group, overhauled bankruptcy laws to make it impossible for those with student loans to file for Chapter 7 or Chapter 13 bankruptcy protection.
This means the great majority of persons with debts accrued to get an education will carry them to their graves, no matter what life throws in the way of their repaying the money.
Our so-called "representatives" in Congress, bowing the the desires of an association that spends millions for lobbyists, made this pernicious change and in the process sentenced millions of citizens to a lifetime of debt servitude.
Just another example of how our politicians-as-usual work to help the rich get richer and leave the rest of us to sink or swim.
Go, Bernie!
Bankruptcy allows those who can't meet their financial obligations to be excused from repaying some or all of their debt. It has been in existence since ancient times.
In this country, the rules for filing bankruptcy are set by federal law.
Giant corporations and the rich can discharge their debts this way, as General Motors and Chrysler have done in the past.
However, federal law prohibits student loans from being wiped out in bankruptcy.
Why?
Because in 2005 the United States Congress, in response to demands from the Consumer Bankers Association, the lending industry's main trade group, overhauled bankruptcy laws to make it impossible for those with student loans to file for Chapter 7 or Chapter 13 bankruptcy protection.
This means the great majority of persons with debts accrued to get an education will carry them to their graves, no matter what life throws in the way of their repaying the money.
Our so-called "representatives" in Congress, bowing the the desires of an association that spends millions for lobbyists, made this pernicious change and in the process sentenced millions of citizens to a lifetime of debt servitude.
Just another example of how our politicians-as-usual work to help the rich get richer and leave the rest of us to sink or swim.
Go, Bernie!
22
Even though I am employed full time, if it were not for income-based repayment, I would default on my student loans with no available recourse. Because I am working and have an upward trajectory of income (even though it pales in comparison to the compounding interest on my loans), I cannot meet the high standard set by Brunner v NY HESC to seek relief by declaring bankruptcy.
I have federally backed student loans that are affordable, but insurmountable. I will be in debt for the rest of my life, but thanks to income-based repayment, I can buy groceries.
I also have privately backed and serviced student loans. The insufferable servicer, AES, does not offer income based repayment. I am currently on a finite 'interest only' payment plan that expires in a year. After that, I am forced to repay my loan at a standard rate, which is unaffordable. There is no market for refinancing private student loans.
The CFPB needs help from Congress to pass laws designed to make post-graduate life possible for me and my similarly situated graduates. The CFPB can only do so much to entertain my complaints. We need greater change.
I have federally backed student loans that are affordable, but insurmountable. I will be in debt for the rest of my life, but thanks to income-based repayment, I can buy groceries.
I also have privately backed and serviced student loans. The insufferable servicer, AES, does not offer income based repayment. I am currently on a finite 'interest only' payment plan that expires in a year. After that, I am forced to repay my loan at a standard rate, which is unaffordable. There is no market for refinancing private student loans.
The CFPB needs help from Congress to pass laws designed to make post-graduate life possible for me and my similarly situated graduates. The CFPB can only do so much to entertain my complaints. We need greater change.
9
The real solution is to make student debt discharge in bankruptcy court like every other debt. 19 year olds cannot be expected to fully understand the true cost of the obligations they are taking on, neither the value of their majors nor the marketability of their diplomas. This will put the onus on proper scrutiny by the lender how much the student is borrowing and what will be their capacity to repay. This will also put a cap on the runaway tuition fees because that is the flip side of the wall of money in the form of student loans that is chasing the education sector because it sees no risk there.
5
You can have low student loan interest rates (very low now given the default rates) or you can have dis chargeable student loans. Pick one.
DOE transferred servicing of our Federal Direct Loans to OSLA a few years ago. OSLA provides criminally poor service that would come afoul of any regulations required for something as simple as a car loan. On a web portal, one cannot even find historical balances associated with each payment, and there is no explanation whatsoever of what factors go into the current payment calculation. Nothing as simple as how many payments remain, or the principal balance on which you payments are based (it's not the current principal). There can be zero doubt that this obscurity is intentional. We are due soon for loan cancellation and we feel absolutely certain it will be and absurdly difficult experience despite following all the rules.
4
This is indeed a scandal and is a drag on the economy as once again debt to the rentier class gobbles up space for real growth. The burden of student debt has become a lifelong hassle as the debtor's income and job potential rarely match the enormity of debt. We have created a class of educated paupers hounded by vile and aggressive collectors causing as much mental anguish as material paucity. There was a day in the US that investment in education was seen as a social good and promoted by the state. Now it's about how to line up more suckers to be exploited by a system that views education as training for work camps and a life of eternal servitude.
4
To add to the mess, there are companies -- essentially scams -- that charge fees to supposedly help student debtors navigate these rules. A friend who owes only about $6,000 to Navient fell behind and was steered to such a firm. She has now lost $600 which she thought was going to pay off her loans but instead was taken as fees. The AG and CFPB should stop this practice.
44
In England student loans are controlled by the government. Repayment is also controlled requiring that repayments are made on a sliding scale only when the student is in employment earning over £21000 ie about $32,000. If full repayment is not achieved in 20 years the rest of the loan is forgiven.
12
But in England, every student doesn't get to go to college. The cost is subsidized (though less than some other European nations) but only to the top 10-15% of students. The rest are out of luck. They have to go to trade schools, get a job, or leave the country and attend school at their own cost somewhere else.
ONLY in the US is college available to literally anyone -- 50 year olds, C- students, foreigners, partying losers who never study. ANYONE can attend in the US, no matter how poorly prepared or non-studious or bad at school, no matter if they are 50 years old or illiterate. You don't get that in other nations, so they can be a bit more generous (with the taxpayer's money).
ONLY in the US is college available to literally anyone -- 50 year olds, C- students, foreigners, partying losers who never study. ANYONE can attend in the US, no matter how poorly prepared or non-studious or bad at school, no matter if they are 50 years old or illiterate. You don't get that in other nations, so they can be a bit more generous (with the taxpayer's money).
3
My rate has been 9% since the 80's and taking care of my parents doubled the principal. But my education? Priceless!
So this group of college educated people are to stupid to figure out for themselves what options are available when they are having a problem. So we build The Consumer Financial Protection Bureau for a couple hundred million a year in taxpayers money and it produces a report giving voice to those same people who can't figure out the system. I just googled it, took four clicks find help.
3
The word is "too."
If your lender tells you that you cannot make payments that are allowed under the law, what are you supposed to do? Student loan servicers are actually telling borrowers that they cannot make income-based payments. This is against the law and the CFPB is already pursuing public enforcement actions against servicers, as a result.
4
MKM - I would like to know how you determined that taxpayers are supporting the CFPB. What is your source? I'll help you out - you won't find a source because the agency is funded by the Federal Reserve. Taxpayers are not funding this agency. Please become more informed.
1
"The Consumer Financial Protection Bureau, the Treasury Department and the Department of Education agreed last month on a basic set of principles that they believe will prevent borrowers from being eaten alive."
This is what passes for leadership today. Could anything be a greater indictment of "the American way of life" ?
This is what passes for leadership today. Could anything be a greater indictment of "the American way of life" ?
2
So you're relying on this statement in an editorial as all that's been done in this area? A simply Google search would show that CFPB is pursuing an $18.5 million enforcement action against Discover for its student lending practices. Do you really rely on information in an editorial for your news?
1
@BK of Highland Park, IL -- why are you such an apologist for the CFPB, not only in response to my comment, but elsewhere in this comment thread.
Have we not had ample evidence that fines do not deter banks and related FIRE sector businesses from predatory practices at all?
Have we not had ample evidence that fines do not deter banks and related FIRE sector businesses from predatory practices at all?
Carla - You didn't answer my question, so I will take that as an admission that you rely on editorials for your news and what happens in reality.
What evidence do we have that public enforcement actions for violations of consumer protection violations do not deter servicers from breaking the law? Student loan servicers were not regulated by the federal government prior to 2011. I'm not an apologist. I'm stating that the information provided here is incomplete. Would you rather not know what is actually occurring? Ignorance is bliss?
What evidence do we have that public enforcement actions for violations of consumer protection violations do not deter servicers from breaking the law? Student loan servicers were not regulated by the federal government prior to 2011. I'm not an apologist. I'm stating that the information provided here is incomplete. Would you rather not know what is actually occurring? Ignorance is bliss?
1
I was one of those defauting student loan customers. I couldn't keep up with the payments. Then again, the first thing I did when I retired was pay the loan off in one lump sum. I 'm not sure I got as much credit for that as I deserved, but I did it. I also bought a new jeep. Life was economically better on retirement day then it was during my working days.
I'm not complaining. I enjoyed my job immensely, and I now enjoy retirement.
The student loan business is too mechanical; they don't know how to adapt.
I'm not complaining. I enjoyed my job immensely, and I now enjoy retirement.
The student loan business is too mechanical; they don't know how to adapt.
>
"Why Student Debtors Go Unrescued [?]" NYTs
Answer: Congress passed laws to make it just that way for those who sought a deal with the Devil to have the American dream.
Stick around debtors' prison is on the increase, again.
"The Faustian dream of progress without limits in a material world magically responsive to our touch overlooks “the priority of external nature.” Today, this is known not as the Faustian dream but the American one."
Terry Eagleton
"Why Student Debtors Go Unrescued [?]" NYTs
Answer: Congress passed laws to make it just that way for those who sought a deal with the Devil to have the American dream.
Stick around debtors' prison is on the increase, again.
"The Faustian dream of progress without limits in a material world magically responsive to our touch overlooks “the priority of external nature.” Today, this is known not as the Faustian dream but the American one."
Terry Eagleton
4
Yet another way for the incompetent to fleece anyone who works for a living.
3
More and more we becoming something other than customers. Less than people. Milk cows, or worse, aphids in an ant hill.
For some services we can choose not to participate when the terms are outrageous. But necessity drives some costs - lifesaving drugs and education are two of them. Bleeding people dry, using unfair pricing and service practices, finding a way to make sure that the "revenue stream" is perpetual rather following the rules to help people manage to pay, isn't good business. It is just immoral.
People are not cows to be milked. They are not revenue streams. The great moral degradation in our society is not, as the orating preachers would have it, gay rights and contraception and abortion. It is the growing prevalence of the failure to see others as humans. Our national motto is not "There is one born every day."
We are the hollow men.
For some services we can choose not to participate when the terms are outrageous. But necessity drives some costs - lifesaving drugs and education are two of them. Bleeding people dry, using unfair pricing and service practices, finding a way to make sure that the "revenue stream" is perpetual rather following the rules to help people manage to pay, isn't good business. It is just immoral.
People are not cows to be milked. They are not revenue streams. The great moral degradation in our society is not, as the orating preachers would have it, gay rights and contraception and abortion. It is the growing prevalence of the failure to see others as humans. Our national motto is not "There is one born every day."
We are the hollow men.
4
"People are not cows to be milked." --- You're looking at the end, and ignoring the cause. The students (your "people") are the root cause of the problem: by demanding loans to enable them to buy something they couldn't otherwise afford.
"They are not revenue streams." --- When you ask to take money from me, I am deprived of my money. When you promise to pay it back a year later, I am still deprived of my money for a year. When I offer you my money for a year with the condition that you pay it back in full, I am free to require more in return - and you are free to decline my offer. This is not a "revenue stream" - this is a contract. If you agree to it, you either live up to it as an honest and reputable human - or you break the terms, like a thief. If you're not willing to pay what you agreed to pay, you're a thief. Consider: Your employer agrees to pay you a salary for a certain amount of work. If the employer decides not to pay when you deliver your part of the contract, do you tell yourself "well, employers are not revenue streams"?
"They are not revenue streams." --- When you ask to take money from me, I am deprived of my money. When you promise to pay it back a year later, I am still deprived of my money for a year. When I offer you my money for a year with the condition that you pay it back in full, I am free to require more in return - and you are free to decline my offer. This is not a "revenue stream" - this is a contract. If you agree to it, you either live up to it as an honest and reputable human - or you break the terms, like a thief. If you're not willing to pay what you agreed to pay, you're a thief. Consider: Your employer agrees to pay you a salary for a certain amount of work. If the employer decides not to pay when you deliver your part of the contract, do you tell yourself "well, employers are not revenue streams"?
1
We should all worry about this impulse--that all people who get into financial difficulty should somehow be "rescued" by the federal government. Are we not teaching citizens at an early age, to be financially irresponsible--because, after all, someone will always be there to bail them out?
I have always found failure to be an excellent tutor--do something stupid, pay the price--and resolve never to do it again--and maybe to be a little more careful about all things financial in the future.
Many young people would do well to learn the lesson early in life--that running up $80,000 in debt to earn an art history degree, with no obvious prospects for paying it back--is just plain irresponsible.
Furthermore...let's resolve to not bail out homeowners, cities, large financial institutions, the U.S. Postal Service--and then send taxpayers the bill. Let's end this bail-out mentality--and let failure and learning run its natural course.
I have always found failure to be an excellent tutor--do something stupid, pay the price--and resolve never to do it again--and maybe to be a little more careful about all things financial in the future.
Many young people would do well to learn the lesson early in life--that running up $80,000 in debt to earn an art history degree, with no obvious prospects for paying it back--is just plain irresponsible.
Furthermore...let's resolve to not bail out homeowners, cities, large financial institutions, the U.S. Postal Service--and then send taxpayers the bill. Let's end this bail-out mentality--and let failure and learning run its natural course.
52
It's unclear how what you're discussing is related to complying with the law. The article is about student loan servicers giving false information to borrowers about their legal options for repayment. Regardless of whether you believe income-based repayments should be allowed, borrowers have that option under the law. If a servicer is stating otherwise, then it is out of compliance. The CFPB has already initiated public enforcement actions against servicers for communicating to borrowers in this way.
23
Respectfully, if personal finance is such an important lesson to learn, why is it not taught in school?
Because that kind of education doesn't stimulate the marketplace.
Because that kind of education doesn't stimulate the marketplace.
5
Since you fail to cite evidence for your debt-and-history degree assertion, one could assume your declaration is based on you personal bias against students and in support of corporate bankruptcy rights.
8
It would seem to me that a simple internet search would yield plenty of information about income based repayment plans. The same is true of stories detailing situations where people took out too many loans, took out loans for degrees that have little or no value in the workplace etc.
The information is out there, but no one wants to recognize that borrowers need to comparison shop (for loans, degrees and institutions) and take responsibility for their actions. This whole situation is analogous to someone buying a new suit of clothes using a credit card and blaming the credit card company when the suit doesn't look good on them.
The information is out there, but no one wants to recognize that borrowers need to comparison shop (for loans, degrees and institutions) and take responsibility for their actions. This whole situation is analogous to someone buying a new suit of clothes using a credit card and blaming the credit card company when the suit doesn't look good on them.
4
We are punishing students unfairly for choosing to get an education, when instead the system should be supporting and incentivizing them to do so. This is clearly a flawed system in need of reform.
3
Why not add a section of questions entitled "Protect Yourself Against Predatory Loans" to the written portion of the driver's license exam?
2
Shouldn't the colleges and universities who benefitted from these loans pay back a portion of the loans? Why do we villainize the lenders but not the colleges and universities that are profiting from sky high tuitions?
6
Here's an apparently novel idea: why not have people pay back the money they have borrowed instead of looking for scapegoats?
9
richard,
why am I absolutely certain that you have no issue with Trump's four bankruptcies?
why am I absolutely certain that you have no issue with Trump's four bankruptcies?
2
Richard - Where in this article does it state that borrowers should not have to repay their loans? Here's what that article is actually about:
1) The law allows those who incur student debt to make income-based repayments.
2) Student loan servicers are not allowing the option mentioned in 1) and, therefore, breaking the law.
3) Borrowers are defaulting on their loans because servicers are not allowing them to make income-based repayments allowed under the law. Borrowers will be able to make higher payments as their careers progress and their incomes increase.
I don't see anything in the article stating that people should not repay what they owe. Here's a novel idea: read the article!
1) The law allows those who incur student debt to make income-based repayments.
2) Student loan servicers are not allowing the option mentioned in 1) and, therefore, breaking the law.
3) Borrowers are defaulting on their loans because servicers are not allowing them to make income-based repayments allowed under the law. Borrowers will be able to make higher payments as their careers progress and their incomes increase.
I don't see anything in the article stating that people should not repay what they owe. Here's a novel idea: read the article!
4
Thank you. It' this mentality of entitlement, of getting something for nothing, or getting a pass for being irresponsible that I simply don't understand. We don't need another generation of victims who always look for the easy way in and out.
2
Having been mislead by Sallie Mae myself when I thought I was asking the right questions to get the assistance I sought when alternative Federal repayment plans were first introduced, it appears things have not changed but only gotten worse due to the increased complexity of the options and rules. Instead of simply describing the problem, however, the Times would be doing as much, if not more, of a service by providing information on what resources, public or private non-profit, besides Salle Mae or Navient, exist that can assist borrowers in wading through this morass.
148
There is no excuse for servicers providing misinformation. And there is no excuse for their failure to provide required information. But I have to wonder why students aren't informed of their rights from the outset. Or why there isn't information widely available online. Is it too much to ask that there be a website informing borrowers in arrears of their rights. This is the Information Age, isn't it?
I sent this editorial to some students and parents who need to know this. I very much appreciate the work that went into this.
Those who do know about this can do their good deed for the day by helping someone who needs to know this.
Those who do know about this can do their good deed for the day by helping someone who needs to know this.
22
We've been playing this privatisation game for decades, and no matter how many times it delivers worse service for more money, the corporate media still pretends that it's a good idea.
On average charter schools perform worse than public schools, UPS is more expensive than the post ofice, and the US military is better than mercenaries, but the push to turn government into a giant feeding trough for global corporations never ends.