Posted on 08/11/2024 6:35:44 AM PDT by karpov
Legal battles over President Biden’s various schemes to forgive student debt continue. In July, the Eighth Circuit Court of Appeals indefinitely blocked the administration’s ultra-generous new student-loan repayment plan, which could have cost taxpayers $475 billion. Additional loan-cancelation initiatives—also certain to face legal challenges—are in the works.
But the high drama of loan cancelation has drawn attention away from a more pressing issue in the student-loan system. After the pandemic-induced student-loan payment pause ended last year, the Education Department implemented a one-year transition period to allow borrowers time to ease back into the habit of paying their loans. That so-called on-ramp is set to expire at the end of September—yet tens of millions of borrowers have not yet made a payment.
During the payment pause, no federal student-loan borrower had to make a payment, and interest rates were set at zero. During the on-ramp, payments are due and interest accrues once again. But borrowers who don’t pay their loans can avoid the worst consequences of failing to do so: Delinquencies will not appear on their credit records, nor will loans be placed in default or sent to collections.
Since most student borrowers had not made a payment on their loans for over three years, the logic of a one-year on-ramp was to allow borrowers time to make financial arrangements to recommence payment. Missing a payment or two would be no big deal. After a year, the logic ran, most borrowers should be comfortably paying their loans every month.
That ideal couldn’t be farther from reality. At the end of 2019, prior to the payment pause, 3.1 million borrowers were more than 30 days behind on their loan payments. As of March 2024—the latest month for which data are available—the number of delinquent borrowers had reached 7.3 million.
(Excerpt) Read more at jamesgmartin.center ...
What really caused this problem to take off was the Great Recession. The job market in terms of overall numbers employed did not recover to 2007 levels of total employment until late 2015...by which time it was still a significantly lower percentage of the total working age population due to population growth.
When you combine sky high student loan costs with an economy that does not produce the jobs people took out the student loans to get, you get massive defaults. Something had to give. If people have no money they can’t pay their loans.
The lessons here should be:
1) The government will always screw you.
2) The government will always lie to you.
3) The government will never give you anything for free.
4) Government involvement in anything will always poison that thing.
5) Big government causes big problems. Less government is always better.
6) College was a mistake for many. It’s a bad path that younger people should know to avoid at this point, with some exceptions.
I say: do not help these borrowers. Hold them accountable. Smart people didn’t fall into the college loan trap. Praise those smart people. Hammer on the debtors and make sure they learn the lessons above. Government is never the solution to anything.
Probably about half of the student loans went for degrees that had very low pay potential.
The colleges knew this but were only too happy to grab the cash.
Claw back the delinquent loans from the colleges.
Only an idiot would repay their student loans at this point. I was an idiot for paying for my kids education when I should let them borrow the money then skate.
Why are we in the school loan business to start with. Trump should cut it off. Maybe sell existing loans to banks??
Why would they bother to pay at all under those terms?
If it’s going to start to go on their credit report, they might bother to start coughing up the payments.
Nope. Obamacare gave government a monopoly on student loans. All restraint on loan limits went out the window. Obama is guilty of creating this problem. Biden’s loan forgiveness promises made it worse. The cure is to ruin the credit rating of people who default on student loan payments.
I and my son are paying off his loan. Over the course of paying it off it as switched between multiple load servicing companies. It is impossible to get a record of payments, or interest. Our government is incapable of managing money.
I’ve had three applicants (I only have 5 doors at this point) to my rentals with quite sizable student loans. They don’t even consider it debt I can tell you!
Credit scores I find are now “dumbed down” as in they are wildly inflated. Even the popular “Credit Karma” app advertises that you can “beat the system” when applying for apartments, which is frightening as a landlord in a BLUE state with very few private property rights left and quickly eroding.
That being said, I would say at least 60% of the under 40 set have a credit score below 600. Most usually in the 400-550 arena which is shocking! I believe they have been taught that everything should be free and is a human right.
No.
“Instant gratification” caused this debt crisis. The lust for I want it now.
Now subsequently we are stuck with a payment crisis because of all the deadbeats.
Bet they still have the latest iPhone.
“If people have no money they can’t pay their loans.”
Not my responsibility. Our responsibility was to pay our tuition at the beginning of each semester. Our responsibility was to save in order to send our kids to college and pay their tuition at the beginning of each semester. I made sure to get the maximum 21 hours each semester and summers to graduate in 3 years at age 20 instead of dragging it out longer meaning more $$$$. That was before kids could get college credit in HS which ours did. And we all had part time jobs and still had time for all the extra activities.
Today’s students whine about 6-9 hours. Set the phone down, get off your butts and get to class! No wonder the work force is in the dumpster.
I see the genius in ruining the credit of borrowers who default. That way you can ensure they will never be able to buy houses and thus do far more long term damage to the economy. Brilliant!
My family was very fortunate to be able to pay off the kids’ student loans - two family members had to die for us to be able to do this, paid off the house too with what was left.
My son (Gen Z) tells me he is the only one of his friends that doesn’t have huge student loans.
Wish we could go back in time, instead of IT, he now wants to do home refurbishing. My nephew is a diesel mechanic, makes a great living (early 20s) and has more work than he can handle.
Oh I don’t disagree with you at all that colleges should be on the hook for taking young naive students, filling their heads with mush, loading them up with debt and then sending them out into the market place where their default on their loans was inevitable.
Go after university endowments.
I'd be happier if Congress passed a law that all educational loans must be wholly owned and managed by the college itself. Don't lend to students who won't have lucrative careers. Any rise in the cost of education increases the risk of non-payment to the college, so keep a lid on the costs. If things go bad, the college eat the costs. Leave the government out of it. Leave the taxpayers out of it. Leave the banks out of it.
The problem in many many cases is not that they have the money and are choosing not to repay. Nor is the problem that they have the money and instead are splashing out all sorts of cash on luxuries. In most cases they don't have the money. They literally can't pay. The good paying jobs they were promised which would enable them to pay back those huge student loans don't exist or were outsourced or filled with H1Bs.
Saying "no you MUST repay" is not going to raise much cash. They simply don't have it.
Biden will kick the can down the road. If Trump wins, then he will look like the bad guy. If Kamala wins, more can kicking and legal games.
That’s the thing about the Left: they reward irresponsibility and have no problem with policies that will make the country a smoking ruin in the mid-long term. For them, it’s all about having the POWER right now.
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