[Vigilanteman]

Using the logic of the open borders crowd who insists we cannot have any piecemeal legislation on immigration, I'll offer that what we really need is "comprehensive student loan reform."

If any bank operated on the same basis as SallieMae, the government owned student loan monopoly, they would be hauled into congressional hearings and probably be litigated out of business.

Among their abuses are:

• Easy to get, hard to repay loans which make zero effort to distinguish between marketable and unmarketable degrees.
  
• Highly paid senior executives who have little or no accountability.
  
• Interest only loans and hidden fees designed to keep the borrower in debt forever.
  
• Interest rates which are typically two to three times larger than prevailing home loan rates.

  Remember BO bragging about making the student loan business more efficient during his re-election campaign by eliminating the middleman, IOW, competition to the government?

  This is the next bubble waiting to happen-- millions of borrowers saddled with debt which they have little hope of repaying and cannot discharge. A homeowner who is foreclosed, at least, can walk away from the debt through the bankruptcy process.

  The only real long-term solution is to phase out SallieMae and privatize the student loan business. The outline of such a plan to do just that:
  

• Immediate write-off of 30% of outstanding balances, 25% loan forgiveness to the borrower, 5% as a fee to the educational institution where the loan originated to collect the remaining 70%.
  
• Authorize the originating institution to suspend degrees and transcripts on loans that become delinquent or to sell them at a discount to third parties.
  
• Originating institutions still unable to collect or liquidate the loans would be subject to a lien on their endowments, real estate or other assets.
  
• Those which have sold worthwhile marketable degrees would have little to fear. Those which have not maybe deserve to have their asset base reduced accordingly.

  In conjunction with this program, all borrowers which are current on payments after provision #1 kicks in would be able to apply and get an interest rate less than or equal to the rate they are paying on their primary residence. It makes no logical sense to have people paying more than double the rate on student loans than they are paying for mortgage loans secured by real property.

[Atlas Sneezed]

Immediate write-off of 30% of outstanding balances, 25% loan forgiveness to the borrower, 5% as a fee to the educational institution where the loan originated to collect the remaining 70%.

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I like the spirit of punishing the schools, but to be fair, I’d give 100% of the loan to the institution, and let them decide at what discount to settle with the borrower. The deadbeat borrower doesn’t deserve a freebie before the negotiation starts.

[sitetest]

Dear Vigilanteman,

Sallie Mae isn't a government-owned entity. When started in 1972, it was a Government-Sponsored Enterprise, like Fannie Mae and Freddie Mac, but never government-owned. Its full privatization started in 1997 and was completed in 2004. It is traded on the NASDAQ exchange under the symbol SLM.

In terms of interest rates, I don't know what Sallie Mae charges generally, however my own unsubsidized student loan with Sallie Mae currently has an interest rate of sub-1%.

“It makes no logical sense to have people paying more than double the rate on student loans than they are paying for mortgage loans secured by real property.”

Actually, in that student loans are unsecured debt, one would expect their interest rates to be substantially higher than rates for real estate mortgages where the real property serves as collateral.

sitetest