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Nicole Gelinas
Get the Government Out of Student Loans « Back to Story

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I get so tired of everyone wanting and expecting the government to come in and fix their finances. From big companies to students everyone feels entitled to free money! Great article.

Bob Richards
http://www.consolidatedcredit.org/

I like Your Article I like Your Thoughts thanks For Share This Amazing Article :-)
Student Loan
I was friendly with a young woman who was enrolling in a program in ethnomusicology at Columbia. She was using student loans to pay the tuition. I knew she would never pay back the loans, I knew she was a poor credit risk and an irresponsible, fun-loving, passionate musician type. Student loans are a huge sinkhole. Why should ethnomusicology studies be paid for by student loans, and why is the credit history of the students applying not examined? This is one more gravy train
Bravo, well done. Austrian Economics makes a comeback.

Thank you!
B. Samuel Davis May 04, 2012 at 9:58 AM
Nicole:

Romney can't do anything other than what he is doing - doing anything else would allow Democrats to falsely claim that Romney doesn't care about 'poor students."

This is an election year piece of irresponsibility that Democrats are particularly good at since through their revolving door with most major media, they still control the national agenda. The nuanced assertion that something else should be done - as described in your article or in other comments, would never make it past the still powerful, and always corrupt Democratic controlled media machine.

What to do? I worked in student loan collections - what I saw was another way that African Americans get $crewed by Democrats. Democrats sell college to minorities as the key to success, but Democratic destruction of the African American family means that many children have poor educations and poor cultural attitudes toward education (something reinforced by Democratic media) even if they completed high school. So, even though woefully unprepared, students enroll in college, take out student loans in order to do so, and only last a few semesters. Once out of school, the interest started piling up, their credit gets ruined - you know the rest of the story. I saw this over and over and over again.

So, there is a deeper problem here. How it gets solved, I don't know - forgiving student loans would be totally unfair to the millions of students who worked, and families who sacrificed and saved, all in order to ensure that their children didn't start out with a backbreaking burden of debt.

As an aside the whole student loan edifice supports another Democratic interest group - the universities - just another of the uncountable number of corrupt Democratic schemes that make our society so unlivable.
The Democratic Party has certainly earns its title as the most corrupt organization on the planet!

Commentator believes financial lenders would investigate and rate the colleges. Right, they did this job so well prior to the government taking over student loans. Please, who do you think is behind the private college ripoffs? Why should private finance benefit from bankruptcy laws that requires the college borrower no recourse to pay for the rest of their life. No risk loans are almost as good as borrowing from the fed and investing it computing trading.
Amen. Our students do not have access to the old private school loans since Obamacare was enacted. Now they have to get loans that require them to begin payments while still in school. For the school, we can't qualify for Federal Financial Aid until we can prove that we are financially stable (although all other schools depend on FAFSA money for a vast majority of their income.) Government intervention causes more problems than it solves.
"Mitt Romney should have seized this opportunity to communicate directly to college students and their parents and explain why more government subsidy is the wrong approach to student-loan financing."

Darn right! Higher Ed: yet another thing that dies the greed of everyone but the students, and from the poison touch of the idol named "Government."
Withheld for Obvious Reasons May 03, 2012 at 8:09 PM
I work in higher ed. The bottom line in every university in the nation is to make sure they maximize every available dollar of federal student aid. The correlation between cost and amount of federal aid is basically 1:1.

Eliminate federal student aid and two things will happen. First, a whole rack of totally useless administrators will hit the unemployment line. Second, tuition cost will come down.
I collect on defaulted student loans for a living, and I cannot fathom the amount of waste in the system. Get rid of student loans and let the invisible hand of the market develop its own credentials
Having the government and especially the President support Government Loans is the same as "Jury Tampering", if you vote against him you will have to pay a higher interest rate and it costs you more.
I think you are wrong here. We need the government in the discussion of student loans. College costs have risen to levels that are just absurd. Whether your school has Division 1 teams that need multi-million dollar facilities or coaches or it is a smaller Division II or III school, college tuition is still very high. I went to both a Division II and III school that did not have superb facilities for athletes yet my tuition costs were fairly similar to those of students at Division I schools. There needs to be some regulation as to how high tuition costs really should be.

To be quite honest, is any one class really worth $1,000 per credit hour? Classes are usually 3 credits which would make one class cost somewhere in the neighborhood of $3,000 not including any school fees or books for the semester. Now, with all of those who attend school these days, whether it be students or professionals continuing their education, can a school truly justify charging this much for tuition? Do they really need to pay for employees who are amongst the laziest I have ever seen? Must schools really pay coaches in excess of $1M per year? How many of these colleges are turning a profit at the end of the day? How much of that profit is given back in the form of scholarships or grants by the school?

To say the least, it would be nice to have some kind of regulation set forth for colleges. We woke up too late to understand or act on what the banks were doing with regards to mortgages and credit default swaps. Only recently when student loan debt has reached such outrageous levels has anyone spoken up about this issue publicly. It is rather simple to see what is going on, why does it always seem that the bubble bursts before a problem is corrected? The government is trying to regulate banks, why can it not regulate colleges? Nowadays you need a college diploma if you want to start a career in a good majority of fields. In some instances a bachelor's degree is no longer good enough, you need a master's degree. I understand it is a student's choice of the school they attend or whether or not to dorm, but the school you attend can help you have an edge over another student when vying for a similar position right out of college. A Harvard student is more likely to get a job if he/she possesses the same qualifications as someone who graduated from Mercy College. Is the education received at Harvard that much different and better than the one received at Mercy? If not, then how can one justify charging more to get the same education?

College costs have gotten completely out of control. The government needs to step in and act as a tough parent forcing schools to make more ethical decisions with regards to costs. Perhaps it means cutting costs in some areas. Is that not what businesses are currently doing during this financial crisis? How can businesses justify working with less people or cutting frivolous spending while still getting the job done but colleges have not? If they have I for once have not seen the benefit in terms of reduced tuition.

I am currently in grad school since January 2011. The fee per credit hour has risen twice in the past 17 months.
how to we get mitt romey this article?
No, loan consolidation won't work for student loans, since they are nondischargeable under the bankruptcy code. You have a better chance cramming down before the IRS, or dying before credit card companies can collect medically incurred debt (both are also nondischargeable). Lenders have a good thing going marketing education loans with the full faith and credit of Uncle Sam, with application papers that have the imprimatur of respectable citizen duty, and the likelihood that parents, their student children, and grandchildren will pay up -- even if it costs them a mortgaged residence.

This is why schools do not compete on costs, except to raise them through the roof. It is also why rolling over or deferring student loans, now the rage, are fraught with fraud and no debt forgiveness at all. Unlike consumer debt, which can be written off by both sides in the name of "goodwill" to the customers, or simply to get rid of merchandise that is worth ten cents on the dollar retail, every penny of meretricious college coursework is "worth it", in the name of society. There are no attempts to tie qualifications for higher ed to work, ability to save, defer personal spending, or manage an actual business. If there were, all professions would be apprenticeships, like merry old England.

There are some efforts to claim fraud against some schools for failing to guarantee employment for all their promises upon enrollment. But good luck taking that to a state court and trying to preempt federal law. Regulation and consumer disclosure must be made. You wouldn't dream of taking out a mortgage without them, do you?

Otherwise, I have no faith that the free market will rectify student debt injustice, any more than it will fix medicine. Unless someone has a nice insurance policy for you to buy.
Martin Zehr: "There is a national interest in assuring the availability of higher education to the greatest number possible."

Nope: there's a special interest -- the higher ed industry -- which wants an as large customer base as they can get.
The Democrats will never agree to this market-guided lending. Loans to students majoring in business, engineering, forestry, etc. would hold up just fine, while loans to students majoring in politically loaded but impractical majors would taper off.

Where, then, would the cadre of disaffected students who cannot hope to get a job in their field of study, except through further government intervention on their behalf, come from?
Without agreeing with your proposal to switch to commercial banks, instead of Federal student loans, I would submit the increase in student loan default rates as a factor that needs to be included in the discussion of interest rates. "...FY 2009 national student loan cohort default rate, which has risen to 8.8 percent, up from 7.0 percent in FY 2008."
http://www.ed.gov/news/press-releases/default-rates-rise-federal-student-loans As indicated in the Department of Education release the current method of addressing this is to take away loan eligibility from 5 schools for excessive defaults.The standard used is if a school has 25% default rate for three years in a row, or greater than 40% in the latest year. Student loan defaults inherently implies a loss of the revenues that are returned to the government by borrowers. There appears to be many issues with the data and looking at the locus of sanctions there does appear to be a concentration among private and proprietary schools. See other data issues that impact for-profit colleges. http://www.insidehighered.com/news/2010/08/16/eddata
If the risk has increased in these loans, it would seem logical that the interest rates should increase. In fact, the proposal on the table amounts to greater losses for the loans, "... Keeping the interest rate at 3.4 percent for just one year would cost $6 billion" http://www.insidehighered.com/news/2012/04/23/obamas-focus-loan-interest-rate-means-another-short-term-fix
There could very well be additional restructuring of student loans, including increasing the number of periods of forebearance to address the economic situation. Increasing the period of time for repayment through interest payments could also provide a mechanism to increase the return from student loans. Currently, Income-Based Repayment Plan has the government assuming the difference between a payment and the interest due for up to three years. http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp
Loan consolidation is the other option for borrowers. This is already done through commercial banks.
It is obvvious that Washington, D.C. has an interest in putting off the crisis in student loan defaults. The obvious solution is to increase the number of co-signers on student loans who are legally obligated in order to increase recoveries in the event of default. Another is to put a lower ceiling on the amounts disbursed. It would appear that the Income-Based Repayment Plan would do better if it simply increased the loan maturity date at the end. This is medicine that's hard to swallow. And impossible to pass Congress.
There is a national interest in assuring the availability of higher education to the greatest number possible. It is clear that redefining Federal budgetary priorities will have an impact on this. Can we address this by the kinds of restructuring of student loans that I have presented?