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New Research Shows Federal Student Aid Is Worse than We Thought
James G. Martin Center for Academic Renewal ^ | December 11, 2019 | Richard Vedder

Posted on 12/11/2019 6:33:01 AM PST by karpov

For years I have railed against the dysfunctional federal student loan program. The availability of cheap federal student loans has enabled universities to increase tuition fees aggressively, helping fund an unproductive academic arms race that, among other things, has led to sizable administrative bloat on most campuses.

The proportion of recent college graduates from the lowest quartile of the income distribution is lower than it was in 1970, suggesting that student loans have not been a successful vehicle for providing college access to those from low-income backgrounds—a primary program goal.

Default rates on student loans are high because standard commercial lending standards are ignored. Schools that encourage students to take out loans have no “skin in the game,” facing no financial consequences when their students disproportionately default on their obligations. In short, the student loan program is dysfunctional and in need of substantial modification—arguably elimination.

The New York Federal Reserve Bank has led the way in researching the loan programs, and a new study details that things are actually far worse than stated above.

Here are a few additional problems:

* Thinking the federal government is going to forgive student loan debt, a majority of students are not reducing their loan balance—at all; * A very small portion (7 percent) of borrowers have huge debts (over $100,000), but owe over one-third of the $1.5 trillion in student loan debt outstanding; * College graduates in 2010 had repaid only 9 percent of their loan balances five years later; * College loan debt rose twice as fast as tuition fees from 2008 to 2018; much student borrowing appears not to meet direct instructional costs; * People living in high-income ZIP codes have accumulated far more debt than those living in lower-income areas, suggesting relatively affluent borrowers are disproportionate participants

(Excerpt) Read more at jamesgmartin.center ...


TOPICS: Education
KEYWORDS: college; studentloans
The cited Federal Reserve study was earlier discussed on FR: Who Borrows for College—and Who Repays? (not many).

The Democratic candidates are promising loan "forgivness", so it's not surprising that many borrowers are not making payments on their loans.

1 posted on 12/11/2019 6:33:01 AM PST by karpov
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To: karpov

There shouldn’t even be Federal Tuition Aid.

Classic example of an “extra-Constitutional” abuse of taxpayer dollars.


2 posted on 12/11/2019 6:36:24 AM PST by BenLurkin (The above is not a statement of fact. It is either opinion or satire. Or both.)
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To: karpov

Financial slavery perpetrated by the benevolent federal government.


3 posted on 12/11/2019 6:37:29 AM PST by Spruce
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To: karpov

Another example of the government coming to the party and urinating in the punch bowl.


4 posted on 12/11/2019 6:50:55 AM PST by moovova
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To: BenLurkin

“There shouldn’t even be Federal Tuition Aid.

Classic example of an “extra-Constitutional” abuse of taxpayer dollars.”

Exactly. However the use of tax dollars goes to democrat/socialist control over the country. To Begin with, it destroys the American family. These kids can’t get jobs, make money nor get out of debt

They don’t get married and they do not procreate certainly not within a marriage

It is bad

Obama stare
Ted it. His stupid- ass VP, Joe Biden, oversaw this while he was promoting from a position of (non-practicing) catholicism

Trump can do only so much. We have much work to do undoing this damage


5 posted on 12/11/2019 7:03:05 AM PST by stanne
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To: karpov

Simple solution: raid school endowments and teacher pensions to repay student loan defaults.


6 posted on 12/11/2019 7:43:23 AM PST by Darteaus94025 (Can't have a Liberal without a Lie)
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To: karpov

Well the Liberal Morons cheered when Obama took over the student loan industry and turned collections over to the IRS.

So go pound sand snowflakes, you can never be forgiven for your loan, and your precious Federal Government will take it out of your ass until every bit is paid.


7 posted on 12/11/2019 8:25:18 AM PST by DanielRedfoot (For Liberals, the issue is never the issue)
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To: karpov

I would just pay it off with a credit card and then blow off the credit card if I was these kids


8 posted on 12/11/2019 10:32:11 AM PST by Truthoverpower (The guv mint you get is the Trump winning express !)
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To: karpov

The actual purpose of the program has always been not the rewards to students, but the reward to academia, helping insure THEY got all the money they wanted.

The same misdirection has always been at work on the government’s ways of helping inidividals with their medical bills or medical insurance. It always really about helping an unaccontable health care industrial complex has no brakes on its costs, with government helping to insure someone will pay them what they demand.

The “return” has been the flow of political donations back to the politicians from the healthcare industrial complex - the real beneficiaries of the federal programs subsidizing individuals healthcare and health insurance.


9 posted on 12/11/2019 10:43:13 AM PST by Wuli
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To: Spruce
It really is. And all a scam for loan sharks.

Trying to help my own son pay off his. Not that he is not employed. He is. But these loans get sold off to 'servicers' who tack on high percentage rates. My son's loan servicer is charging 21%.

What's more, they tack on miscellaneous fees and service charges from time to time. This really is loan sharking akin to payday loans. I do NOT advocate for the taxpayer being on the hook for the loans, but I DO think the scammers need to be rooted out, and the whole system torn down. A totally privatized system needs to be in place, and we need to rebuild our vocational training system (new VOTECH centers across the country).

I've always wondered if these loan servicing companies are not giving some kind of kick backs to those in academia, such that they promote the "you must go to college to have a decent life" mindset.
10 posted on 12/11/2019 4:49:54 PM PST by softengine
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