Student Loan Crisis

[BaptistDave1]

Been thinking about student loan crisis and why so many are defaulting. I have been talking to people about this, particularly people who are paying their student loans and a few who have defaulted. The problem doesn’t seem to be that they don’t want to pay back their loans. I have not run into anyone that is in favor of student loan forgiveness, amazingly enough. What they want is for the government to reduce the interest on the payments so that they are reasonable.

Right now, a person can get out of college with a loan at 12% -15% and payments around $450 after the 6-month grace period. Few employers, and I mean very few, are offering recent college grads any kind of job that is more than an entry level position at a company and they don’t pay enough for someone to rent, pay on a car and ay pother living expenses and be able to afford the monster payments the government is asking them to make on their student loans. Entry level positions pay around $20,000 a year (give or take) at least in my neck of the woods. I know some who don’t make $18K on an entry-level job as a college grad.

At our rent prices around here, you cannot rent, pay on a car and be able to save for retirement, save for emergency car repairs AND pay off student loans at the rate the government wants the loans paid back. That’s why students are defaulting. They cannot afford the payments. It’s not a case of wanting us to pay it for them. They want a good credit report because they want to buy a house. They get the need to pay back loans. They don’t want to live irresponsibly.

So, I think that the solution, what would go a long way, is to make the payments affordable by lowering the interest on the loans. I pay 2% on my car loan and the bank is not hurting. The government needs to lower the payments by lowering the interest and lower it dramatically and then cap it.

I would also add that we need to cap the tuition rates that universities are charging. The cost for students at major universities is immense and these schools get away with it because they get paid by the government.

As it stands, even though you can get income-based payment plans, what others have told me is that the lower payments don’t even pay off the full amount of interest, much less any of the principle. So, while they are making payments, they are in effect, still going further into debt with each payment. The only good thing is that as long as they make the payments, they protect their credit score, but are stuck renting an apartment. That’s not how it should work.

I think that students really need to think realistically about the kind of job they will get out of college and consider not going to the most expensive colleges. You can end up with $100,000 in student loan debt just for a four year degree that is the same degree offered at less expensive colleges.

The student loan crisis needs to be addressed in terms of getting universities to charge less and the government charging less interest. In truth, we need to privatize student loans through the banks and get the government out of the student loan business.

 

[Adonia]

In truth, we need to privatize student loans through the banks and get the government out of the student loan business.

Which is the way it was before Obama changed it to what we have now. A loan officer at a bank was not going to give an 18 year old 20k or 40k per year to major in Women's Studies, but the government would (and did)!

 

[Reynolds]

Been thinking about student loan crisis and why so many are defaulting. I have been talking to people about this, particularly people who are paying their student loans and a few who have defaulted. The problem doesn’t seem to be that they don’t want to pay back their loans. I have not run into anyone that is in favor of student loan forgiveness, amazingly enough. What they want is for the government to reduce the interest on the payments so that they are reasonable.

Right now, a person can get out of college with a loan at 12% -15% and payments around $450 after the 6-month grace period. Few employers, and I mean very few, are offering recent college grads any kind of job that is more than an entry level position at a company and they don’t pay enough for someone to rent, pay on a car and ay pother living expenses and be able to afford the monster payments the government is asking them to make on their student loans. Entry level positions pay around $20,000 a year (give or take) at least in my neck of the woods. I know some who don’t make $18K on an entry-level job as a college grad.

At our rent prices around here, you cannot rent, pay on a car and be able to save for retirement, save for emergency car repairs AND pay off student loans at the rate the government wants the loans paid back. That’s why students are defaulting. They cannot afford the payments. It’s not a case of wanting us to pay it for them. They want a good credit report because they want to buy a house. They get the need to pay back loans. They don’t want to live irresponsibly.

So, I think that the solution, what would go a long way, is to make the payments affordable by lowering the interest on the loans. I pay 2% on my car loan and the bank is not hurting. The government needs to lower the payments by lowering the interest and lower it dramatically and then cap it.

I would also add that we need to cap the tuition rates that universities are charging. The cost for students at major universities is immense and these schools get away with it because they get paid by the government.

As it stands, even though you can get income-based payment plans, what others have told me is that the lower payments don’t even pay off the full amount of interest, much less any of the principle. So, while they are making payments, they are in effect, still going further into debt with each payment. The only good thing is that as long as they make the payments, they protect their credit score, but are stuck renting an apartment. That’s not how it should work.

I think that students really need to think realistically about the kind of job they will get out of college and consider not going to the most expensive colleges. You can end up with $100,000 in student loan debt just for a four year degree that is the same degree offered at less expensive colleges.

The student loan crisis needs to be addressed in terms of getting universities to charge less and the government charging less interest. In truth, we need to privatize student loans through the banks and get the government out of the student loan business.

People can go through college debt free. (That's a novel idea.) Due to injuries, I came off a full football scholarship, transferred to a school closer to home, and went on academic scholarship. I Lived off campus and worked full time. Graduated debt free with money in the bank.

 

[Salty]

Who says you have to go to college the minute you grad from High School. Take a year off - save some money.
and then when you complete a BA - wait a year or 2 for masters

Or join the military - great education benefits there.

 

[carpro]

People default on student loans because...well...because they can. And there are no meaningful consequences.

 

[BaptistDave1]

People can go through college debt free. (That's a novel idea.) Due to injuries, I came off a full football scholarship, transferred to a school closer to home, and went on academic scholarship. I Lived off campus and worked full time. Graduated debt free with money in the bank.

Yeah, but that is not the norm. Most kids don't get that kind of luck.

Schools ramped up their tuition and fees when the loans were guaranteed by the government. They are too high now for anyone, unless they are extremely wealthy to pay for out of pocket. The interest needs to be lowered and payment expectations by the government need to be lowered to a manageable level. I know one person whose payments are nearly $700 a month and she can't pay that much and is working to get the payments lowered, but lower payments will only pay for the interest, and at that rate she would never get out of debt.

If people are given a reasonable payment plan that they can budget for, they will pay their loans off. But the government has found a new revenue stream in student loans.

 

[BaptistDave1]

People default on student loans because...well...because they can. And there are no meaningful consequences.

Well, there are meaningful consequences, particularly with their credit score and that knocks them out of getting a car or buying a house and that impacts their future. Their wages can be garnished and they can be sued by the government. They may not get hauled into court and put in jail, but there are consequences.

They default on them because the government's payment schedule is often very unreasonable and it needs to be changed. And universities need a tuition cap, as well.

 

[carpro]

Well, there are meaningful consequences, particularly with their credit score and that knocks them out of getting a car or buying a house and that impacts their future. They may not get hauled into court and put in jail, but there are consequences.

Exaggerate much?

No one can be jailed in this country for defaulting on a loan and no one is ever "hauled into court" over a debt.. Credit score penalties are temporary and there are ways around it. Most of them simply declare bankruptcy.

As stated, no meaningful consequences.

Meanwhile the taxpayers get soaked again.

 

[Reynolds]

Yeah, but that is not the norm. Most kids don't get that kind of luck.

Schools ramped up their tuition and fees when the loans were guaranteed by the government. They are too high now for anyone, unless they are extremely wealthy to pay for out of pocket. The interest needs to be lowered and payment expectations by the government need to be lowered to a manageable level. I know one person whose payments are nearly $700 a month and she can't pay that much and is working to get the payments lowered, but lower payments will only pay for the interest, and at that rate she would never get out of debt.

If people are given a reasonable payment plan that they can budget for, they will pay their loans off. But the government has found a new revenue stream in student loans.

Luck? You call working my tail off at a full time job and in the classroom to keep grades up for academic scholarship "luck"???????
Were the borrowers aware of interest rates when they borrowed? Should have been.
I may be a jerk, but I have no desire to subsidize the loans of people who could have paid at least most of their college costs if they had spent the time they spent drinking, working instead.

 

[Reynolds]

Well, there are meaningful consequences, particularly with their credit score and that knocks them out of getting a car or buying a house and that impacts their future. Their wages can be garnished and they can be sued by the government. They may not get hauled into court and put in jail, but there are consequences.

They default on them because the government's payment schedule is often very unreasonable and it needs to be changed. And universities need a tuition cap, as well.

That's why "The borrower is slave to the lender.". Think long and hard about borrowing

 

[carpro]

My daughter owed over $20,000 on over a half a dozen separate loans when she graduated. She had 6 months after graduation to start repaying them. She consolidated them into one loan with a payment a little over $200 a month for 10 years at what I considered a reasonable interest rate at the time.

I paid the loan for 7 or 8 years and she finished it off. Paid in full. I found nothing unreasonable about the whole thing. Of course, her degree got her a well paying job immediately. If a kid wants to major in social services or psychology or library science, they better watch how much they borrow. It's a relatively low paying degree.

 

[BaptistDave1]

Exaggerate much?

Nope. But you might invest in some reading comprehension classes.

No one can be jailed in this country for defaulting on a loan and no one is ever "hauled into court" over a debt..

Yeah, that is what I said, if you had paid any attention.

Credit score penalties are temporary and there are ways around it. Most of them simply declare bankruptcy.

You cannot declare bankruptcy on student loans. And the credit score reporting is ongoing as long as the interest builds and no payments are made. You can have your wages garnished when are sued.

As stated, no meaningful consequences.

Meanwhile the taxpayers get soaked again.

Get back to me when you actually know what you're talking about.

 

[BaptistDave1]

Luck? You call working my tail off at a full time job and in the classroom to keep grades up for academic scholarship "luck"???????
Were the borrowers aware of interest rates when they borrowed? Should have been.
I may be a jerk, but I have no desire to subsidize the loans of people who could have paid at least most of their college costs if they had spent the time they spent drinking, working instead.

At today's tuition rates, working much of the cost of tuition and fees is not possible. You can't work enough in the summer to pay most of the costs. The fees are just too high. There was a time when you could. Those days are gone.

What needs to happen is the government needs to rethink their approach to repayment and charge lower interests and longer finance periods to help students. No one wants to remain in debt, and most do want to pay their loans off, but the government wants to charge through the nose on interest and the payments are just too high for those who are still trying to find a job in their degree field that will pay them enough. Until then they are working jobs that just don't pay enough to meet the government's demands.

 

[carpro]

You cannot declare bankruptcy on student loans.

Of course, you can. Student loans can certainly be included in a bankruptcy. The debt probably won'tbe discharged, depending on circumstances. But included they are. all the time. Garnishment of wages may or may not be allowed, depending on the state the deadbeat lives in. But the federal government can confiscate any tax refunds, as they should.

No meaningful consequences at all. It's just another way to freeload on the taxpayers.

Student Loan Debt in Bankruptcy

Most debtors won’t be able to discharge (wipe out) student loan debt in Chapter 7 or Chapter 13 bankruptcy. However, if you can prove that repaying your student loans would cause an undue hardship to you, you can get rid of your student loans in bankruptcy.

The Undue Hardship Exception
To have your student loan discharged in bankruptcy, you must demonstrate that it would be an undue hardship for you to pay them. The test for determining undue hardship varies between courts. Also, many courts look at the undue hardship test as all or nothing—either you qualify to get the whole loan discharged, or you don’t. Other courts have discharged a portion of a debtor’s student loan.

 

[Reynolds]

At today's tuition rates, working much of the cost of tuition and fees is not possible. You can't work enough in the summer to pay most of the costs. The fees are just too high. There was a time when you could. Those days are gone.

What needs to happen is the government needs to rethink their approach to repayment and charge lower interests and longer finance periods to help students. No one wants to remain in debt, and most do want to pay their loans off, but the government wants to charge through the nose on interest and the payments are just too high for those who are still trying to find a job in their degree field that will pay them enough. Until then they are working jobs that just don't pay enough to meet the government's demands.

Work in the summer? I worked 40 to 50 hrs per week year round. I went to college during the day and worked second shift at the Sheriff's office. I did some truck driving and heavy equipment work on weekends.

 

[carpro]

Current interest rates:

Current & Historic Federal Student Loan Interest Rates
Loan Type 2019-20 2014-15
Direct Subsidized (Undergrad) 4.53% 4.66%
Direct Unsubsidized (Undergrad) 4.53% 4.66%
Direct Unsubsidized (Grad) 6.08% 6.21%
Direct PLUS (Grad & Parent) 7.08% 7.21%
Aug 5, 2019


Current terms available:

FinAid | Loans | Repayment Plans

Standard Repayment. Under this plan you will pay a fixed monthly amount for a loan term of up to 10 years. Depending on the amount of the loan, the loan term may be shorter than 10 years. There is a $50 minimum monthly payment.

Extended Repayment. This plan is like standard repayment, but allows a loan term of 12 to 30 years, depending on the total amount borrowed. Stretching out the payments over a longer term reduces the size of each payment, but increases the total amount repaid over the lifetime of the loan.

Graduated Repayment. Unlike the standard and extended repayment plans, this plan starts off with lower payments, which gradually increase every two years. The loan term is 12 to 30 years, depending on the total amount borrowed. The monthly payment can be no less than 50% and no more than 150% of the monthly payment under the standard repayment plan. The monthly payment must be at least the interest that accrues, and must also be at least $25.

Income-Contingent Repayment. Payments under the income contingent repayment plan are based on the borrower's income and the total amount of debt. Monthly payments are adjusted each year as the borrower's income changes. The loan term is up to 25 years. At the end of 25 years, any remaining balance on the loan will be discharged. The write-off of the remaining balance at the end of 25 years is taxable under current law. There is a $5 minimum monthly payment. Income Contingent Repayment is available only for Direct Loan borrowers.

Income-Sensitive Repayment. As an alternative to income contingent repayment, FFELP lenders offer borrowers income-sensitive repayment, which pegs the monthly payments to a percentage of gross monthly income. The loan term is 10 years.

Income-Based Repayment. Similar to income contingent repayment, Income-Based Repayment caps the monthly payments at a lower percentage of a narrower definition of discretionary income.

All six plans are available for student loans, but only the first three plans are available for parent loans.

Loan Term for Extended/Graduated Repayment

For extended and graduated repayment, the following chart shows how the maximum loan term depends on the amount borrowed.

Loan Balance Maximum Loan Term

Less than $7,500 10 years
$7,500 to $9,999 12 years
$10,000 to $19,999 15 years
$20,000 to $39,999 20 years
$40,000 to $59,999 25 years
$60,000 or more 30 years


So, where's the problem?

 

[BaptistDave1]

Of course, you can. Student loans can certainly be included in a bankruptcy. The debt probably won'tbe discharged, depending on circumstances. But included they are. all the time. Garnishment of wages may or may not be allowed, depending on the state the deadbeat lives in. But the federal government can confiscate any tax refunds, as they should.

No meaningful consequences at all. It's just another way to freeload on the taxpayers.

Student Loan Debt in Bankruptcy

Most debtors won’t be able to discharge (wipe out) student loan debt in Chapter 7 or Chapter 13 bankruptcy. However, if you can prove that repaying your student loans would cause an undue hardship to you, you can get rid of your student loans in bankruptcy.

The Undue Hardship Exception
To have your student loan discharged in bankruptcy, you must demonstrate that it would be an undue hardship for you to pay them. The test for determining undue hardship varies between courts. Also, many courts look at the undue hardship test as all or nothing—either you qualify to get the whole loan discharged, or you don’t. Other courts have discharged a portion of a debtor’s student loan.

You would have to prove that you are incapable and will remain incapable the rest of your life to repay your student loans. 99.9% of people will have no bankruptcy option for student loans. It is just not going to happen except in the rarest of situations. You would have to have a very exceptional situation to declare bankruptcy. Exceptions to the rule, don't negate the rule.

It is simply not an option. You cannot declare bankruptcy to get out of paying the debt. And if you don't think wage garnishments and a rotten credit score are meaningful consequences, you are wrong.

 

[Salty]

Exaggerate much?

... no one is ever "hauled into court" over a debt..... Most of them simply declare bankruptcy. .

Carpo - not totally correct Just ask the multitude of fathers who have been jailed for not paying "child support"
Mind you - I am not talking about deadbeats - I'm talking about those guys who are working, trying their best
but when the amount is unreasonably high amount to be paid - or an unexpected event occurs. First they may
take your drivers license - well, how are you going to get to work? - When I was a taxi driver - I would often pick
up guys to take them to work (they had about a 90 day authorization) = and who paid the fare - Social Services.
WAIT! the Govt takes their license and/or vehicle - and then gives them a free taxi ride! ( some were as much
as $50 one way. makes a lot of sense doesn't it. Several of the taxi drivers were divorced and became a driver
so they could be an independent agent. As such - they did not get a paycheck as they were not employees - so no
support was taken out - NOT so they didn't have to pay - but so they could at least pay the rent (often just a room)
and a few dollars for food. - One day - the cops came and towed two cars away - the cops would not even let the
one guy get his wallet out of his vehicle. In addition- the cops refused to tell the drivers where their cars would be taken.

And when sent to jail - for non payment - they cant work - and now are getting even further behind in payments.

and for bankruptcy - you CANNOT include child support.

On my radio show, I interview three fathers on Christmas Eve - they would not be seeing their kids over Christmas.
well - that a whole other story.

 

[carpro]

It is simply not an option. You cannot declare bankruptcy to get out of paying the debt. And if you don't think wage garnishments and a rotten credit score are meaningful consequences, you are wrong.

I've just proved it is possible to get out of paying the debt through bankruptcy and you still deny it.

People with lousy credit scores can and do purchase cars and homes.

Best thing to do is pay the debt instead of freeloading on the taxpayers or whining about it when it comes due. The terms are reasonable enough.

There is a movement afoot now called "strategic default", meaning they default on purpose, even if they can afford to repay the loan. Why? The goal is to provoke a settlement for a lower amount. Meaning they like the education they received, they just don't want to pay full price. They want someone else to do it for them.

Freeloaders! Why would anyone support or advocate for that type of behavior?

 

[carpro]

You would have to prove that you are incapable and will remain incapable the rest of your life to repay your student loans. .

That is not true.

"Congress did not define the term “undue hardship” in the U.S. Bankruptcy Code. A common, but not necessarily universal, definition was introduced in a 1987 court case, Marie Brunner v. New York State Higher Education Services Corporation (Docket 87-5013, October 14, 1987, 831 F.2d 395). The Brunner case established a three-prong test for a borrower to demonstrate undue hardship:

The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans.

Additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans.

The debtor has made good faith efforts to repay the loans."