My Proposal for Student Loan Reform

12/6/2017 | Brian Griffin

[Brian Griffin]

There is a college affordability crisis.

My university charges over ten times as much for tuition as when I first went there in September 1975.

I know many academics and loan originators will provide vehement arguments why their feed bowls should't get rationed, but unless college loans are restrained to reasonable amounts there will be Democratic demands for "free" college education that will eventually cost many of us and most future college graduates dearly.

BANKRUPCY BAR

For loans issued after July 1, 2018, only the principal amount(s) borrowed
a. from the federal Department of Education (DoE)
b. to refinance, with no new additional or higher private sector fees payable after issue and uniformly lower interest rates, student loan(s) existing as of that date
c. private and other governmental loans of up to the basic standard limits below in total as of time of the loan issue, co-signed in full by the college, with a 7% annualized life of loan interest & private sector fee cap
less associated interest above 4% and fees and other charges paid after issue shall be exempt from bankruptcy discharge.

[Article I, Section 8: "The Congress shall have power...To establish...uniform laws on the subject of bankruptcies thoughout the United States."]

CAPPING THE AMOUNTS

The basic standard limits a student may borrow from the federal Department of Education for undergraduate education shall be limited as follows:
a. $4,000 for the student's first year at the college
b. $5,000 for each subsequent year up to three at college
c. $6,000 for each subsequent year after said three, for up to four additional years per student, after receiving a degree from a college [graduate loans]
d. $2,000 for each subsequent year after said three, for up to two additional years per student, if no degree has been received from a college [loans when a college education isn't completed in a timely fashion]

These limits shall be adjusted for inflation in the manner Social Security payments are, then rounded up or down to the nearest whole multiple of $100.

The (b) and (c) subsequent year limits for students enrolled in programs authorized to issue degrees sufficient to meet the educational requirements for registered nurse licensure or public school teacher certification in the state of the college shall be doubled.

The (a) first year limit and (b) and (c) subsequent year limits for students enrolled in programs authorized to issue degrees sufficient to meet the educational requirements to become licensed to practice law or be a medical doctor in the state of the college shall be four and seven times larger, respectively.

[This section allows students at good schools like Harvard to borrow more.]
The Secretary of Education shall allow the (b) and (c) subsequent year limits for full-time students be raised to the average amount paid upfront for full-time tuition for the prior year, excluding all grant and loan amounts, when:
a. the school requests it and pays a $10,000 processing fee to the DoE in the manner the Secretary shall specify, and
b. the board of trustees or college president or their equal certifies that average amount paid (accurate to at least 5%)
c. over 90% of DoE loans issued in the fifteen to twenty prior calendar years at the school have been paid off
d. over 90% of DoE loans upon which a repayment has been made are in good standing with the DoE
e. no more than 20% of DoE loans by initial principal value of any year of issue from the school in the prior 20 years are in default
or shall provide a reason in writing to the school why it should not be raised.

TIMELY COURSE PROVISION PROVISION

The limits for federal loans above may be reduced by up to 40% for any college that the Secretary of Education finds to have had a substantial problem in a recent term in timely providing course placements needed for students to graduate on time.

VIRTUAL EDUCATION

Virtual education shall not be eligible for federal student loan issue or any student loan bankruptcy bar.
[It should be cheap enough as to not require federal loans or protection exceeding a $750 bankrupcy petition fee.]

STATE LAW

State law may regulate any and all non-federal/private sector aspects of student loan issue, including that of interest rates, fees, charges and to require colleges (and college-related entities) to co-sign loans related to persons within the jurisdiction of the state.

[firebrand]

Stop telling parents how much they have to borrow. That just assumes borrowing, and they do it because they think they have to or it is expected.

Just give the costs and the amount of the grant, if any, and work-study amount. Let the parents decide whether to borrow, work harder or get a second job, or send the kid to a cheaper school.

[HippyLoggerBiker]

My proposal:

1) Borrow whatever you want
2) Put up collateral that equals or exceeds the value of the loan
3) Pay back the loan or lose the collateral (and your ability to make another loan)
4) Have a nice day

[gogeo]

If you’re going to make any college debt dischargeable in BK, you will end the student loan program. Period.

[LostInBayport]

When my daughter was going to college, it seemed that the various professors for many of her classes had written a book of his/her own, and required for his/her book to be purchased in addition to the basic textbook. It seemed like quite the scam to me.

That happened to me quite a few times when I was in college. I was working but even then the cost of books ran into the hundreds of dollars per semester and those were used copies. I would always buy used textbooks at the bookstore, unless it happened to be the year that the "professor" decided a new edition of his tome was needed. In that event you had no choice but to buy a new copy at an exorbitant price. A scam indeed.

[Brian Griffin]

“If you’re going to make any college debt dischargeable in BK, you will end the student loan program. Period.”

I’m just proposing to trim it back to a reasonable size while providing potential students with less than provident parents a chance.

[gogeo]

Then you don’t understand the student loan program, or lending in general.

[tumblindice]

‘And the prof’s textbook usually isn’t that great.”
Had a real property I prof do that.
The `book’ wasn’t even bound. It was just hole-punched legal-sized pages of copies of cases and her notes held together with steel rings, but priced like real case books.
We groused about it until they made her stop doing it.

[dhs12345]

Lol. Did she think that people wouldn’t complain?

[RFEngineer]

Too complicated. The answer is simpler and already understood. If people can’t pay their debts they go to bankruptcy court. They either liquidate the debt or restructure it.

Just change the law back to the way it was to allow student loan debt to be discharged in bankruptcy court and the problem will solve itself.

Tuitions will plummet as what people can pay meets what universities can charge.

Loans will not be made unless the borrower can demonstrate they will be able to pay it back.

[King Moonracer]

Colleges have a lot more non-faculty parasites than they had in the 70s. I was looking for a link but I remember hearing that it was about one to one ratio of non-faculty to faculty 40 years ago, now it’s 2.7 to 1.

[Eisenhower Republican]

“co-signed in full by the college”

In theory, this is a great idea and holds colleges responsible for turning out employable grads. In the current campus political environment, it would give school admins free rein to keep out “undesirables” (a.k.a. anyone to the political right of Mao Zedong).