Posted on 06/03/2019 4:50:58 AM PDT by Kaslin
Student loan debt is getting out of control. More than 1 million people default on their student loans every year. That is 22 percent of borrowers. And the numbers are rising; 40 percent will default on their student loans by 2023. For borrowers under age 30, their average monthly payment is almost $400. Student loan debt now exceeds $1.5 trillion — surpassing both auto loan and credit card debt. It is an epidemic that will continue to get worse unless something is done.
Making tuition “free,” as some Democrats recommend, isn’t the solution, since that just passes the debt along to other Americans as taxes are raised to pay for it. It also doesn’t work. In Sweden, where tuition is free, 70 percent of students borrow money for things like room and board. This is the same rate as students that take out student loans in the U.S.!
It would be nice to get the government out of the business of student loans completely, but since that will probably never happen, here are some realistic solutions that may help.
There are two parts to this dilemma. First, the laws must be changed to stop this from continuing. Second, address existing borrowers who cannot repay their loans.
Stop the emphasis that everyone must go to college. The percentage of high school graduates going on to college has increased to 67 percent. But many people are perfectly happy with trade schools. Student loans for trade school are far cheaper than for college. Encourage people to join the military, which can help pay for school. Students need to start considering doing their first two years of college at a community college, then transferring to a public university. Some degrees, such as nursing, can be completed at a community college in two years. Urge students to work while going to college, even if it means taking longer to complete a degree. High school guidance counselors can be of great assistance in this area.
Start teaching money management as a required class in high school or college. Students today are so coddled by their parents they expect to have nice things while in college instead of putting the money toward educational expenses.
States should offer loans that are invested. One of my law school loans was from the state of Massachusetts. After I’d made payments on it for several years, I was informed that I no longer owed the $6,000 remaining on the loan because the bonds that had been invested in had performed so well.
Student loans aren’t dischargeable in bankruptcy unless a borrower can prove “undue hardship.” Few borrowers qualify under this high standard. This is unfair considering other type of debt is dischargeable, such as credit card debt and most tax debt. If student loan debt becomes dischargeable, lenders will be more cautious about who they make loans to. They won’t give loans to people with bad credit history or who plan on majoring in fields that don’t pay enough to repay the loans. It will also stop colleges from constantly increasing tuition, since lenders will no longer approve as much in student loans. The price of college is increasing almost eight times as fast as wages. The average cost of attending a public university is now over $20,000, and at least double that at private colleges. Each department in college has an incentive to use all of their budget or otherwise another department will take it and they will get less money the next year.
Student loans aren’t dischargeable in bankruptcy unless a borrower can prove “undue hardship.” Few borrowers qualify under this high standard. This is unfair considering other type of debt is dischargeable, such as credit card debt and most tax debt. If student loan debt becomes dischargeable, lenders will be more cautious about who they make loans to. They won’t give loans to people with bad credit history or who plan on majoring in fields that don’t pay enough to repay the loans. It will also stop colleges from constantly increasing tuition, since lenders will no longer approve as much in student loans. The price of college is increasing almost eight times as fast as wages. The average cost of attending a public university is now over $20,000, and at least double that at private colleges. Each department in college has an incentive to use all of their budget or otherwise another department will take it and they will get less money the next year.
Allow more generous repayment plans. Right now, the income-based payment plans, even for people who work at nonprofits, are impossible for people struggling with other types of debt. Allow borrowers to pay back a lower amount each month, taking into consideration their other debt obligations. There is no student debt crisis in Sweden because payments are spread out over 25 years. In the U.S., payment plans are 10 years. This is even though Swedish students take out about the same amount in students on average as U.S. students.
It’s now hurting older people. Those above age 60 owe an average of $33,800 in student loan debt. The government is known to garnish their Social Security benefits to pay it off. It also hurts women disproportionately. They hold two-thirds of student debt, but make 20 percent less than men.
While it would be nice to leave the student loan business up to the free market, eliminating the federal government’s role in providing loans, good luck getting Congress to stop meddling. These options are at least far better than “free” tuition.
“Student loans aren’t dischargeable in bankruptcy unless a borrower can prove “undue hardship.” Few borrowers qualify under this high standard. This is unfair considering other type of debt is dischargeable, such as credit card debt and most tax debt. If student loan debt becomes dischargeable, lenders will be more cautious about who they make loans to.”
Okay, just one more time. When Congress passed a law that companies had to fully fund their retirement programs, the government fell under this law as well. Up to this point most companies and the various governments funded their sometimes very elaborate and expensive defined benefit retirement plans out of current revenues. But as baby boomers retired this would no longer be possible. (
As a result of this law, every company I am aware of did away with their defined benefit retirement plan. Government, however, did not.)
Congress had to show where the funding for the gold plated retirements would come from so they picked student loans. To make this work they had to make it illegal to discharge those loans through bankruptcy. (Up to this point schools had “students” in their fifties and sixties who were regulars in bankruptcy court and who had never held a job.) Congress also made it illegal for banks to give out student loans so they would have a monopoly. Otherwise, government would have to compete and the rates would be too low to work.
No can do away with student debt because, suddenly, the gold plated government retirements would no longer be funded. So, the political talk about forgiving student debt is just that...talk.
I’ve advocated the “Use existing bankruptcy law - make student loans dischargeable” position for some time.
I’m not happy about it, (having paid for 3 kids college educations) but there IS a standard for insolvency - and just because debt is of one class versus another makes no difference to the insolvency.
It does nobody any good to have a barrista owe $100k that increases at 7-11% per annum. It’s not going to get paid back - regardless of whether it is discharged in bankruptcy.
It also is instructive to note what happens to academia in the wake of such a policy change.
College Campuses especially the most liberal will be decimated, literally destroyed. The activist “professors” that proliferate within such loan-funded liberal paragons of ignorance will be on the street nearly overnight - able to enjoy the basic premises of their supposed beliefs.
University “Think Tanks” will have to think again.
A college education will become meaningful, or it will not be available.
Many colleges and universities will close, consolidate.
They will become less administratively top-heavy.
Children will face the reality of the world BEFORE being indoctrinated, indebted, and impoverished.
Best of all, the cost of a college education will go down dramatically.
There are many more benefits in life to facing reality before you’re so far underwater with student loan debt.
The “relief” is that they default on the loans. Bailing anyone out will only make it worse, and regulating the industry like every college student is a simpleton is no different than “going socialist.”
When I attend college (Fall ‘67 to Spring ‘71) A Summer time job would cover a semister’s tuition and our parents expected that from us. During Thanksgiving, Christmas and Spring breaks we went home.
“give relief” by that you mean “other people’s money”.
Sounds like the Socialist solution to a self inflicted problem to me.
These snowflakes borrowed a lot of money, many to stay in school, because they couldn’t face the real world and it was easier than going to work.
Life is hard, you borrow money, for any reason, you pay it back. It was agreed to by both parties in the covenant.
Pay off the loans with a 50% tax on tuition for “Studies” majors.
What to do? How about paying it off?
This country is supposed to be a “free enterprise system” so step one; get the US government out of the student loan business. Step two; make only those with student loans responsible for paying it back, not the US taxpayers.
There is always a crisis! How about the last down turn this country just went through! Did the government help people pay for the mortgages because people lost their jobs! Answer NO. I saw friends who were in this spot. I almost became one also. When I got my job I paid off the debt that I mounted because of no work and with no help from the government.
Guess my point is that in today’s world some people have to understand that everything will not be given to them and the government is not the answer to everything and they can’t have everything they want today. Yes college is expensive then maybe they might have to take a different approach to get the education. Like go to college part time and work to pay it off, etc. I know it is not easy but it can be done!
History of Student loans.
1960’s National DEFENSE Student Loans
1970’s National DIRECT Student loans
1980’s - administered by private banks
1990’S - private banks unfair so when back to govt administration.
May have the dates wrong but not the trend.
Make them take the Dave Ramsey personal finance course and learn how to manage their money and pay their debts. No college degree required to take Dave’s course. All one needs is the desire to live debt free and the will to succeed.
I’ve advocated the “Use existing bankruptcy law - make student loans dischargeable” position for some time
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I completely agree. We seem unable to convince parents and kids to create a business case for student loans, so I think it is necessary to cause the lenders to require one. We wouldn’t loan an 18 year old $50k to start a brake shop without a business plan, but we will loan it to a student without any question of how it will be repaid. You idea would add some discipline to the lender side of the process, which would enforce it on the borrower.
“When I attend college (Fall ‘67 to Spring ‘71) A Summer time job would cover a semister’s tuition and our parents expected that from us. During Thanksgiving, Christmas and Spring breaks we went home.”
Yes, me too. But my kids can’t make $50 000 in the summer.
But those snow flakes are going to vote for socialists.
“Life is hard, you borrow money, for any reason, you pay it back. It was agreed to by both parties in the covenant.”
People go bankrupt every day. They “break the covenant” to use your language.
Why?
They have accumulated debt - for whatever reason - irresponsible credit card spending, loss of income, buying a car they couldn’t afford, gambling, or just a financially profligate lifestyle.
The court decides if you pay all, some, or none of it back based on your financial situation at the time of the filing.
When lenders have no risk involved in loaning money - this is the primary socialist/crony element in the student loan debacle.
If lenders must assess risk, then everything changes. borrowers are assessed. Interest rates are set appropriately for the risk incurred. Loan amounts are limited or denied.
So your assessment of a “Socialist Solution” is already flawed. I’m not saying the borrower is not an idiot, or is not largely to blame for their predicament.
But that’s why we have bankruptcy. Clearing unpayable debts is the best course of action in a bad situation.
The problem is everyone complains about the low birth rate. Well there is about a 10 -12 year window from 18 - 30 where it makes sense to have kids. How can anyone start a family these days when you start out so far in debt? Through H-1b, offshoring the loan racket we’ve made life miserable for the young.
Agree with your statement 100%!
Solution is easy. Find and incarcerate the soulless bastards who by pointing a gun at the the head of these children forced them to sign and be responsible for accepting tax payer money.
One family member is going to a big state school. Tuition is $15K. Room and board is another $10K. This doesn't include supplies, fees, etc. Costs annually are about $30K. They work, too, but that is for them to eat and have clothes and gas to drive to and from work.
Any degree that isn't professional will be difficult to pay off in 10 years. Those professional degrees, most of the time, then require grad school to make anywhere near what is required to pay the debts off nowadays.
Grad school is anywhere from $10-60K/yr.
By the time they are out, (like in law school) You're looking at upwards of $200K. It could go as high as $400K in total.
How about getting the government back out of is, using the students to fund the federal pension funds, allowing debt to be discharged in bankruptcy, and having the school on the hook for the debt if it turns bad?
But yeah, blame the student who can't get anywhere professionally without a college degree (You can look at Griggs vs Duke Power (1971) which banned employment tests because it was discriminatory and at that point almost required any job that could be handled with a high school diploma to now require a college degree even if the job can be taught on the job.)
I'm fortunate. I took 0 debt to graduate college (when it was actually affordable with some family help as well as working part-time 9 months of the year and full time during the summer.) Husband paid his off eventually(took a while but it was still affordable.)
Kids who are middle class now and want to stay there?
They have to sell their financial soul 90% of the time to stay where they are.
All of this is why I counsel the kids I mentor that they should go to the community college route for 2 years before going to the big school the last 2 of them. The debt isn't worth the shackles for 20 years to get started on living more than hand to mouth.
But yes, blame the students entirely for the system set up to enslave them financially for 20 years just to stay at the same financial level (if they so choose to not go the trade school route.)
The entire point of the Gender Studies Degree is to signal the “I’m WIth Her” folks at HR that you will be a reliable government bureaucrat like Lois Lerner and harass citizens that “aren’t woke”. Now that Her Thighness has failed the value of their “Masters of Gender Studies” is a liability instead of an asset so they are trying to off load the debt on their enemies, the taxpayers.
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