Posted on 10/06/2014 8:20:46 AM PDT by TurboZamboni
The question, "Is that degree worth it?" is coming up a lot more often these days. There's little question how "Lisa S." would answer.
Forbes.com tells the story of Lisa (her full name's not given), who's a 39-year-old Minnesota lawyer making about $20,000 a year and on public assistance. She is $350,000 in debt and realizes she'll probably die before paying it back.
Lisa started out studying at the Minneapolis College of Art & Design, graduating with under $25,000 in student loans that she paid off in two years. The problems began when she moved to California for a master's degree at the University of Southern California, hoping that it would open up new jobs. When it didn't, she sought out Pepperdine Law School, exiting with more than $275,000 in loans.
A single mother, she took another loan to help study for the bar, then had to take the bar again when she moved back to Minnesota, where the cost of living is lower.
(Excerpt) Read more at bizjournals.com ...
But, at the moment, the college loan industry is doing NOTHING to share the costs. The colleges get to continue jacking up tuition far beyond the rate of inflation and the loan industry continues to enjoy taxpayer protection and better than market rate interest on loans which would never be made otherwise.
Changing the rules of the game going forward, for loans not yet written, for students not yet in college, is different (and acceptable and probably necessary) than changing the rules of the game AFTER THE FACT, and changing the contractual obligations on existing debt, especially, encumbering institutions with debt obligations that never legally signed on for those debts.
Some of your ideas might be starting points for a way forward for the future, but they can't be constitutionally-applied to the existing trillion dollars worth of student debt already out there.
sitetest
America threw all of that out the window when they installed the current regime.
Sort of like the public unions who used their political and organizing might to guarantee their members pensions which were not based on reality and are now crying that taxpayers have to make up the difference by digging deeper in our pockets.
The harsh reality is that they coerced an economically unsound promise from the public through political organization and, thus, they can lose it in the same way. Nobody is bailing out my 401(k) because the market tanked.
Most of your post is garbage. You still dichotomize folks into two groups - evil colleges, and victimized students and parents. You throw in a bizarre irrelevancy concerning your inability to manage your retirement accounts. And then, you recommend illegal and unconstitutional solutions to punish your imagined villains and advantage your imagined victims.
Sorry - doesn't wash. At all.
Your argument is that to fix the the problems of illegality and unconstitutional action that flow from the current regime, the answer is to promote further illegality and unconstitutional action.
The house is on fire so let's throw some more gasoline on it. Yeah, that'll do it!
It's sad to see such arguments made at Free Republic.
sitetest
The problem is that the loan industry didn't make the rules. That was idiots in government. And they didn't borrow the money. That was the students and their enabling parents. I do believe student loans should be bankruptible - of course that will make them much harder for most folks to obtain, but c'est la vie.
An intact family can see that their child gets a degree cheaply. Maybe not in four years, and some may not be able to avoid debt entirely. But degrees are available cheaply to people willing to put in the work for them.
I live in Pennsylvania which has one of the highest state subsidized school tuitions (Penn State) in the country. If kids here can obtain cheap degrees, it can be done anywhere.
Thank you very much. I’ll be here all night folks and please... don’t forget to tip your servers.
Feel good slogans? How a bout contract law that goes back many hundreds of years.
You go borrow money from a lender. You buy a cow with the money you borrowed. The cow dies.
Guess what, YOU still owe that money and the law says YOU have to pay it back, not your neighbors, not the cattleman, not the stockyard.
Next time be more careful picking a cow.
I'm also sympathetic to the fact that the loan industry doesn't make the rules. Still, they are more than happy to exploit the rules due to the taxpayer guarantee.
Granted, Lisa was an idiot to accumulate $300,000 in debt for educational loans, though it isn't clear how much of that amount was original principal and what was added on as fees, late charges, extra interest and the like.
But the point is that a real lender who didn't have the taxpayer guarantee would've cut her off at some point long before she got that deep into debt.
Let the other posters enjoy their sanctimonious smugness about why she should be saddled with that debt forever . . . but the point is that she will not likely ever to be able to pay it back.
While I made a proposal on my original post on how to distribute the pain around a little and so did you, the sanctimonious group has done little more than to endorse ensuring that the taxpayer will eat just about all of Lisa's bad decisions both by making the loan impossible to pay back and ensuring she will spend most of her life on public assistance.
The same attitude will also ensure that conservatives win fewer elections. But, I suppose, all of that is a small price to pay for the right to be sanctimonious.
I get going to USC Film for her MFA. I have no idea why Pepperdine Law on top of that. If you’re good enough to make money doing video editing and production, and especially to get into the film program at SC, do that. Work your butt off, network your butt off, and make that work. California needs another lawyer like Charlie Sheen needs coke and hookers.
Absence of evidence is not evidence of absence.
Because I don't endorse your illegal, unconstitutional means to achieve some worthwhile purpose doesn't mean I think the system should remain unchanged.
I'm merely pointing out that your means are immoral, illegal, unconstitutional, and, quite frankly, cockamamie.
sitetest
Dear sitetest,
Re: “I’m merely pointing out that your means are immoral, illegal, unconstitutional, and, quite frankly, cockamamie.”
I can’t tell you how much I appreciate seeing “cockamamie” used in a post. It’s such a rare thing these days.
As always,
trisha
LOL. Thanks. I like the word.
:)
Punchline:
Sounds like a good start.
Well, it was funny, brother.
But you are going to have a rough time getting through the night on one squirrel joke!
I can't see forgiving some portion of student loans in a blanket manner because many, many people took less prestigious degrees precisely to avoid debt. This trend of punishing people in our country for doing the right thing has got to stop. And there can be no question - going forward, student loans should be bankruptible. We will see an immediate and long overdue tightening in lending standards.
It's my personal belief that retroactively, at least some portion of outstanding student loan debt should be bankruptible, which I suppose will leave taxpayers on the hook. While people took out student loans voluntarily and foolishly, most of those loans were taken in times where job prospects were much brighter. Having people declare bankruptcy still allows them to get out from a very bad decision, but it is a path that would not be taken lightly and would have repercussions.
I'm not sure that making student loans more readily dischargeable in bankruptcy would cost taxpayers as much as one might think.
The only loans, if discharged in bankruptcy, that would directly affect taxpayers are federally-guaranteed loans. Since 2010, only the federal government can make these loans. As well, for a long time, there have been limits on federally-guaranteed and direct federal loans. The current limit for dependent undergrads is $31,000, for independent undergrads is $57,500. These are not the loans of horror stories. For most folks, even declaring bankruptcy isn't going to result in the discharge of much, if any of this debt. A $30K debt may run $400 per month, and a bankruptcy court may readily extend the payments to reduce the payment. We're not even talking about the payment for a new, near=luxury car.
I suspect that the bulk of student loans guaranteed by the federal government is tied up with folks who attended undergraduate studies, most of whom have less than $30K in federally-guaranteed debt. When I look, it appears that average student loan debt is around $30K, but that's a combination of federal and private debt, meaning taxpayers are not on the hook for some part of that total.
Graduate students may borrow more - up to $138K, or up to nearly a quarter million for veterinary school. However, there probably aren't that many veterinary students in the US.
Undergraduates with $100K or more in debt mostly have debt from private student loans. There, a little tweaking of bankruptcy law to make student loan debt a bit easier to discharge (or at least, to cut interest rates and payments, if not to reduce principal) will have the largest effect, and that effect will be felt mostly by the lenders, as private loans that were federally-guaranteed are aging and rolling off the books.
This simple fix - making student loan debt somewhat easier to work with in bankruptcy - will enable those borrowers who truly got in way, way over their heads to get out from under the burden, will continue to force those who can pay to pay, will assure the maximum repayment of original principle, will go the furthest to protect the taxpayer, and will hurt most the party that legally is actually at risk - the lender.
It will also cause a major tightening of credit standards, force folks not to pay obscene tuitions that they can't find, and thus, put downward pressure on college tuitions and fees.
Couple this with an end to federal loans - privatize the whole thing without any federal guarantees - and the problems associated with student loans will work themselves out over time.
Of course, following this prescription would cause massive dislocation in the higher education industry. Large numbers of four-year, residential programs would just wither away, cease to exist. Community colleges and commuter colleges would see enrollments soar. Some colleges would be pushed toward radical innovation to use technology to radically reduce the cost of higher education. It would be much harder for research universities to fund basic research.
I suspect that we'd see a large rise in “technical universities” that grant a three-year “baccalaureate” that would look more like a European degree, with much of the liberal arts content trimmed out. Fewer folks would have a classical, four-year liberal arts-based degree (which includes even most science and engineering degrees in the United States, currently).
So, some pluses, some minuses, but on the whole, I think it would be a net plus.
All we need to do is make student debt more easily discharageable in bankruptcy while allowing the results of bad lending to fall primarily on those who made the bad lending decisions - the actual lenders.
sitetest
The entire “student loan” business is now a scam, whereby the government (legislators, administrators) support the loans, to prop up so called educational institutions that are grossly overpriced.
Eisenhower warned against the “military - industrial complex,” which some today believe has kept us in more or less perpetual low level war.
I liken the education scam to this; e.g. the “government - education” complex.
Smart parents will direct their serious student children to community college for two years, where costs are lower. Keeps them out of big school Greek fiascos.
Five years after graduating and starting work, nobody cares if you went to the big university as a freshman/sophomore.
The problem is, so many of them are living with their parents. I suspect a fair number of these ex-students and their co-signing parents would be happy to declare bankruptcy if it meant an end to a significant portion of their debt. I'm sorry that's what our country has come to, but I believe it has. Remember the days when people didn't used to default on their mortgages? A fair amount of the stigma has been erased. I don't see student loan based bankruptcies much differently.
A large number of bankruptcies in the student loan area will force another bailout of the banks and we the taxpayers will be left holding the bag.
Because it is sensible, I doubt that what I've suggested herein will become law. But if it did, I don't think it would require any wide-scale bailouts of any lenders.
From what I've read, there's roughly a trillion dollars of outstanding student debt. But roughly half this money is being paid back, on time, in full. A big chunk of the remaining half-trillion comprises deferred interest and various fees for late payment, default fees, etc. I recently read of a case of someone who borrowed $70K, and through penalties, interest, fees, had $280K in debt. Much or all of that sort of thing would be rolled back in bankruptcy court. If banks were counting those fees and interest on non-performing loans as performing assets, they not only deserve to go broke, but deserve to go to jail.
My own guess is that most everyone with $50K or less will in debt will be able to repay the principal, with modest interest, in full. I'm guessing that the total losses, both private and public, will amount to a couple or three hundred billion or so. Spread out over a number of years. The federally-guaranteed part of the losses will be a rounding error in the federal budget. The private losses will be significant, but spread out over a period of years, will hardly be unbearable.
The crucial part of this is to to stop the bleeding. I read that roughly $100 billion in debt is being added to the tab each year. Thus, it's necessary to make changes to bankruptcy law as soon as possible, and to end federal loans as soon as possible.
However, because a train wreck is not yet quite imminent, it is unlikely that anyone will do anything positive. Then, when the train starts derailing in a spectacular way, folks will panic and do all sorts of counterproductive things to “fix” the problem. Which will likely mean an across-the-board write-off of a significant amount of the principal, bailouts for the lenders, and even more money for student loans. Argh.
sitetest
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