'Student Loan Nightmare': 'Where Is Our Bailout?'

A couple of months ago, I reviewed The Student Loan Scam, by defaulter-turned-activist Alan Michael Collinge, for The Wall Street Journal. Although Collinge raises some legitimate points about the legal treatment of student borrowers, the book seemed overwrought to me. I was especially struck by the way he underplayed the extent to which people who get into serious trouble with their student loans are responsible for their predicaments. Judging from Collinge's own anecdotes, defaulters usually have made some serious errors of judgment, including blithely assuming that a given degree is worth the money they're borrowing and failing to learn the details of what they're getting into. Over at the Anderson Cooper 360° blog, CNN Production Assistant Samantha Hillstrom provides yet another illustration of how some borrowers get in over their heads:

I am 23-years-old, two years out of college and I am sitting on $115,000 of student debt. And based on my lender's loan terms, I only have roughly 12 years to pay it off. How much does that make my monthly payment, you ask? A whopping $1,200 a month. And let's just say my lifelong dream career in television doesn't lend itself to that. The only option my bank is giving me is to go on "graduated repayment plan." That means that for four years I will only be paying off the interest every month. How much is that? Well, $115,000 with interest rates between 4-8%… that's about $600 a month and that doesn't even touch the principal amount. People don't pay off houses in 12 years and I am expected to pay off this student loan in an entry level position?

Some might say, "Sam, you shouldn't have gone to a private school in New York City if you wouldn't be able to pay it off." Well, I made a lot of mistakes when signing up for my loans, but I was uneducated on the process and on the repayment and now I'm stuck. I share the same anxiety as the families struggling to pay their mortgages. How was I ever to expect the financial crisis that was going to happen and where can I get some help?…

Here is my question: why aren't student loans receiving the same attention, same care and forgiveness as every other loan in America?…Where is our bailout?

In short, Hillstrom went to a college she couldn't afford, did not research her options, did not bother to learn the terms of her loan, got a degree that was not terribly useful (I'm guessing), and took a job that does not pay very well to pursue her "lifelong dream career in television." Of course she wants a bailout; everybody else who has screwed up royally seems to be getting one.

As I pointed out in my review, this sort of situation is far from typical. The average debt for college graduates who borrow is about $20,000, less than one-fifth the amount Hillstrom owes. Education Department data indicate that default rates are between 5 percent and 10 percent.

Hillstrom may have been inspired by an already classic 2008 Reason.tv video.

[Thanks to P Brooks for the tip.]

Comments

[toxic]

The thing is that there is no way out of it. You pretty much have to be comatose to be able to declare bankruptcy on student loans. So while the guy above is a dumbass, he does have a point. A grown man who runs up 100000 in credit card debt on whores and blow can declare bankruptcy no problemo, but a poor sclub who spent 115000 getting a degree in interpretive dance when he was too young to vote has to fake his own death to escape.

It is a bit weird, don't you think?

[Jorgen]

Not at all. When you're the dipshit who lent money to a dude who's got a $100,000 credit card bill, that's your problem. Pretty much by definition, student loans are made to people who have no credit and no assets, so if you could declare bankruptcy easily, there would be no incentive not to just go bankrupt right out of college and never pay back a dime. And since the asset is your skills, it makes sense that you can't get out of it just by not having any liquid assets.

If we made student loans harder to escape from, we would also make them a lot harder to get, which would be very sad for poorer students who can't pay tuition up front.

[tas murah]

The one you're guessing about - degree usefulness - if probably the most overlooked factor. I'm doing okay with one year of trade school while my wife's art degree friends are working in fast food. I'll have my student debt paid off within a year or two. Sooner if I wasn't making extra payments on my mortgage.diet menurunkan berat badan

[toxic]

to young to drink (legally), not vote.

[Old Bull Lee]

The one you're guessing about - degree usefulness - if probably the most overlooked factor. I'm doing okay with one year of trade school while my wife's art degree friends are working in fast food. I'll have my student debt paid off within a year or two. Sooner if I wasn't making extra payments on my mortgage.

Okay, I'm bragging a little but only to prove a point - I don't consider myself special, anybody can do the same.

[Jorgen]

And it's not like the art degree folks didn't know that an art degree isn't going to help them out much. They did it because they thought it was enjoyable, or easy, or enlightening, and they should be responsible for that decision.

[Gilbert Martin]

"Here is my question: why aren't student loans receiving the same attention, same care and forgiveness as every other loan in America?...Where is our bailout?"

Just once, I would like to hear one of these people actually be required to explain why all the John Q. Taxpayers out there who haven't screwed up should consider themselves obligated to bail out their stupid ass.

[Old Bull Lee]

toxic - Isn't that because most of the loans are subsidized?

And to add to what I said earlier - my chosen trade is not my lifelong passion, but that's a sometimes necessary sacifice nobody tells these kids to make.

[JW]

Idocracy is getting a here a bit early, no?

Full disclosure: I made my last grad school student loan payment last month. How? I didn't borrow more than I could afford and took a job that paid for half of the tuition.

[JP]

I doubt she could have borrowed that much without her parent(s) as co-signer(s). If so, what were they thinking at the time?

[Pro Libertate]

What would tuition be without massive government subsidies and weird, semi-secured student loan laws? One tenth of what it is today? Less?

As for these student victims, well, I'm not very sympathetic to such arguments, even though I suffered through high payments in the early part of my professional career, too. You made the choice, and I'm sure you had public school options that you chose to eschew. Tough. I'm sympathetic to you personally, but I'm not willing to subsidize you more than I already have.

[Keith]

She spells it out clearly at the end:

"I chose to go to a private school and I chose to work in a field where the starting salaries are low."

...yep. In New York City no less.

[ChicagoTom]

I don't understand why, if the government is going to guarantee the loans (principal and interest at that), the gov't doesn't just give the loans out themselves. Why have a private entity/middle man taking a cut?

Another problem is that the lenders, who are giving out guaranteed loans, also own subsidiary companies that are collection agencies. The defaulted (gov't guaranteed) loan then gets turned over to the collection agency which then gets to make even more money.

I also don't understand why you can't shed the debt through bankruptcy? Why is it every corporation in the world can shed their liabilities through BK proceedings but yet individuals aren't allowed to have these student loans adjusted.

[Bean Counter]

Actually, as part of Obamacare, that's what's supposed to happen.

[Bean Counter]

I was replying to the first part, about the government handling the loans. THAT'S what is supposed to happen under Obanacare. What this has to do with health care, I have no idea!

[JP]

I also don't understand why you can't shed the debt through bankruptcy? Why is it every corporation in the world can shed their liabilities through BK proceedings but yet individuals aren't allowed to have these student loans adjusted.

I don't claim to know all the ins and outs of it, but one benefit of requiring that the loans be non-dischargeable in bankruptcy is that it lowers the cost of borrowing.

[Pro Libertate]

ChicagoTom,

My understanding is that the "special status" of student loans under the law was intended to encourage lenders to make more of what are really unsecured loans, all in the interest of maximizing the number of people who pursue higher education. I think that was a mistake, because it's driven tuition through the roof more than just about any other factor, but try telling that to Congress.

Taking away a lot of the default risk also keeps student loan interest rates down.

[robc]

ChicagoTom,

The bk bit is due to the government guarantee.

If you just get a regular ordinary bank loan to pay for college it would be bankruptable. Of course, no reasonable bank would give you that, at least not at the levels being discussed here.

[JW]

I think 'lil Sammy is providing the best example of cognitive dissonance to date: I made bad decision after bad decision and now I'm in a bad situation as a result. And yes, I fully expect everyone else to bail my incredibly short-sighted ass out.

[Silentz]

Ignorance of the consequences is no excuse. You still getting speeding ticket if you're going 40 in a 20 zone, even if you didn't know the speed limit was 20.

How 'bout a little personal responsibility here? This is what we get when we expect someone else to take care of us(read:government). We don't educate ourselves sufficiently and get into problems like these.

The bankruptcy issue is a bit odd. That I do agree with. But if there isn't a little pain involved with resolving the issue, no lesson is learned.

[JW]

I don't understand why, if the government is going to guarantee the loans (principal and interest at that), the gov't doesn't just give the loans out themselves. Why have a private entity/middle man taking a cut?

Because there is a TON of money to be made in this rent-seeking business plan. There are people who are multi-millionaires as a result of issuing gummin-backed student loans.

[ChicagoTom]

It's funny how whenever Reason talks about student loans they always manage to ignore the fact that the rules in place have been essentuially written there by the banking/lending industry.

In many instances, the you can't even get good information from the schools financial aid departments cuz they are getting kickbacks from lenders as well.

From this article:

It's all part of a growing scandal, in which lenders gave colleges and top officials money and perks - sometimes based on how many students signed up for their loans.

...

At New York's Columbia University, the head of financial aid was suspended after allegedly netting $100,000 on stock in a loan company recommended to students.

"Columbia's responsibility is to the students, getting them the lowest rate possible, not enriching their particular administration officials," says Raphael Graybill, a Columbia student.

In internal bank documents obtained by NBC News, students are referred to as "the target."

At some universities, when students looking for affordable loans called financial aid offices, they unknowingly spoke with people actually working for loan companies.

Yet Reason never seems to want to address these issues. Why not? Maybe because that would show that the private sector is quite corrupt? And libertarians are loathe to attack the private sector?

I think it's pretty shitty to take 18 and 19 year old college kids -- who likely have never had loans or much financial experience and don't really realize how these things can negatively affect them long term -- and hold them to such high standards while giving a pass to the corrupt private sector that is taking advantage of these kids at every opportunity they can.

Yes kids just entering college aren't fiscally responsible. Hell most adults aren't fiscally responsible. But that still doesn't justify targeting them and profiteering from their ignorance, nor does it excuse all the other schemes that go on.

[Hugh]

She's cute. I can think of some ways she make a lot of extra $$$ quickly.

[Publilius]

I also don't understand why you can't shed the debt through bankruptcy? Why is it every corporation in the world can shed their liabilities through BK proceedings but yet individuals aren't allowed to have these student loans adjusted.

Once upon a time, student loans were just same as any other loans during bankrupcty. Then back in the early 1980s, a smart law student realized that at the moment he graduated from law school, he had barely any assets. So he immediately declared bankruptcy, got out of his student loans, then proceeded to start a law career unencumbered.

Other law students saw this, and they too started to declare bankruptcy immediately upon graduation. Then the medical students saw what was happening, so they started doing it.

Eventually so many people were doing this that it was jeopardizing the entire student loan program. So Congress stepped in and specified that student loans could not be discharged due to a bankruptcy.

[kinnath]

As a 20-something college educated women, she has a bright future as a high-end call girl, which could also be a stepping stone to a highly-visible position in the TV business.

Problem solved, always ask the engineers first.

[PC]

Here's one thing I do think we need regulations regarding, whether its student loans, credit cards, bank loans, etc. They should have to spell out for you what the terms of the loan are, not fine print and subsections that don't show you what monthly payments will be at certain amounts or balances, etc. If I have found out one thing it is that people are very student, so the reasonable person test really doesn't work, if you are doing business with masses you have to figure you are dealing with someone either very lazy or near retarded.

[just sayin\']

So Congress stepped in and specified that student loans could not be discharged due to a bankruptcy.

Um, they can't be written off under Chapter 7, but they can be dramatically reduced under Chapter 13(?) reorganization . . . . .

[robc]

It's funny how whenever Reason talks about student loans they always manage to ignore the fact that the rules in place have been essentuially written there by the banking/lending industry.

See the post 2 minutes before yours.

[Dello]

Everyone with a federally guaranteed student loan should be able to say " Take it out of my future Social Security payments."

[PC]

Not "people are very student", it should read "people are very stupid", what a student mistake to make.

[JW]

Yet Reason never seems to want to address these issues. Why not? Maybe because that would show that the private sector is quite corrupt? And libertarians are loathe to attack the private sector?

Seriously? Reason never criticizes rent-seeking private companies? Are you sure you aren't new here?

[robc]

people are very student

RC's Law FTW.

[ChicagoTom]

Taking away a lot of the default risk also keeps student loan interest rates down.

I would have assumed that what keeps interest rates down are the government guarantees rather than the BK rules.

The gov't guarantees of interest and priciple to the lender allows the lender to charge a lower rate since there is no cost to a default happening.

The BK rules seem to be in place to be the stick to keep borrowers from using bankruptcy to make the taxpayers eat it.

But this leads me to the same question as above...why is the private sector involved at all?

Why doesn't the government just give out the loans directly (at even lower rates than the lender since the profit motive is removed)

[ChicagoTom]

Seriously? Reason never criticizes rent-seeking private companies? Are you sure you aren't new here?

Not new at all. My point was about the way Reason treats the student loans issue.

And no, I haven't seen Reason criticize private companies RE the student loans at all. To hear Reason tell it, the only problem with the student loan system in place is that these college kid borrowers are dumb.

[JW]

ChiTom--You're answering your own questions. People in a position to affect the rule making process are making sure that it benefits them the most.

I would rather we get the federal backing out of the equation and that would perhaps bring honesty back into business. It might also make college actually affordable again, instead of assuming that everyone has to be above average and attend college, as if it's a god-given right to do so.

[SpongePaul]

Did anyone Force him to sign the loans, did they force him to go to that school... NO! Then it is his fault, not the student loan, or the goverment. Plus student loans have got to be the easiest loan to pay back. yeah they take a while, but you can defer the payments many times, and have them adjusted to what you earn as well. They make them easy as hell topay back. now my experince with them is a decade old. and i choose to go to a public university and it only cost me 1,500 per smeester. but, it was my choice, no one made me do anything, so it was my responsibility alone

[phalkor]

I don't think anyone here could honestly say that actors in the private sector never engage in corrupt and damaging practices.

Nonetheless, the focus of Reason is on the corrupt and damaging practices of government that are often instigated by a perceived need to regulate the private sector.

If the private sector were perfect there would be no bureacratic controlling measures. It's just another facet of the same issue, almost a chicken-egg thing. Reason's highlights one side while some other muckraker is pointing at the private sector.

Agree. Disagree. You can only pass the blame around so much before you have to conclude that it's everyone's fault.

[Unsustantive Kurt]

When I signed my student loan papers, I don't remember hearing that I had to pay them back in 10 years after graduation. Of course the responsibility rests upon me. I don't think it would be too great a burden for the lenders to outline the terms of the loan, like they do mortguages.

On the other hand, I got a computer science degree from a state school. Also, I was enlisted in the Illinois National Guard, and they took care of 1/3 of my student loan debt. It took me about 2 years to pay it off.
Yes I am bragging, but I am also illistrating that student loans aren't all bad.

[Menstrual Retardation]

Has Ms. Hillstrom considered a career in prostitution?

[Pro Libertate]

Well, I think the lenders would be hampered mightily if the government hadn't smoothed the way with favorable laws. Old school student loans were for relatively low amounts and included loan qualifications. To eliminate that, people who wanted education to be available to all--a laudable enough goal, in and of itself--changed the law to make such loans something different than a run-of-the-mill unsecured loan.

[kinnath]

My wife and I both went to a public universtity full time while raising two kids and working part-time. Without student loans, we would not have gotten college degrees.

We came out of school with about $17k of loans between us in the mid-80's. It seemed like a huge burden then, but I am left shaking my head at the total stupidity of young people that borrow six-figures to get advanced degrees in non-professional areas (if you ain't gonna be a doctor or laywer or engineer -- how on earth do you expect to pay that money back).

[JW]

Not new at all. My point was about the way Reason treats the student loans issue.

And no, I haven't seen Reason criticize private companies RE the student loans at all. To hear Reason tell it, the only problem with the student loan system in place is that these college kid borrowers are dumb.

I can't answer that one. This is the first student loan post I can recall.

As to college kids being absolved from the responsibility, no thanks. Exactly how does that prepare them for life?

If they don't have the higher reasoning skills to begin with, to ball-park how much they will owe and what their chosen filed will probably pay, then they aren't qualified for college and should be flipping burgers somewhere where they can do less collective harm.

[Paul]

That noise you hear? Smallest violin in the world playin' a sad song for you. Buh bye, now. Anyone who runs up $115,000 in student loan debt and doesn't have a guaranteed job as a brain surgeon lined up the minute they step out of college? Sorry, I have zero sympathy.

[Menstrual Retardation]

I blame Opera for constantly repeating that everyone needs a college degree. People listen to her. Why? I have no idea.

[JP]

As my college-student nephew said when we were discussing where he plans to live and what he plans to do after he graduates (aside from playing WoW), "Why does everything have to be about money?"

[Menstrual Retardation]

"I don't understand why, if the government is going to guarantee the loans (principal and interest at that), the gov't doesn't just give the loans out themselves. Why have a private entity/middle man taking a cut?"

Mr. Lender - Senator Jones.

Senator Jones - Mr. Lender.

[JP]

I blame Opera for constantly repeating that everyone needs a college degree.

It's been a long time since I listened to Rossini's Lo Studente Debitore. A lot of catchy tunes -- I can see how it would make people want to borrow for college.

[scape]

First question on the revised SAT:

A student plans on taking $115,000 loan at 5% interest and getting a job paying $20,000 a year. What should they do?

A) Change schools
B) Change jobs
C) Ask parents for money
D) Any combination of A, B and C.
E) Ask taxpayers for a bailout.

[P Brooks]

[Thanks to P Brooks for the tip.]

*thrusts hands triumphantly overhead*

-----

I think it's pretty shitty to take 18 and 19 year old college kids -- who likely have never had loans or much financial experience and don't really realize how these things can negatively affect them long term -- and hold them to such high standards while giving a pass to the corrupt private sector that is taking advantage of these kids at every opportunity they can.

How hard is it- really!- to look at the amount of the loan, and ask yourself:

"How the fuck am I going to pay that back?"

As for "giving a pass to the corrupt private sector"... I think you might want to consult with your elected Representative, on that one. And while you've got him/her/it on the phone, ask why economic literacy is such a low priority for the otherwise ever-overreaching Educrats.

[Pro Libertate]

Menstrual Retardation,

It's Okra, dude, Okra.

[some fed]

"I was uneducated on the process and on the repayment"

Typical college student behavior. Diving right into a discussion without doing the required reading.

Libertopia is going to be an ever-more distant dream if people can't be bothered to read the things they sign, like promissory notes.

[J sub D]

As The Chosen One has informed us

[kinnath]

I used to say that young people should prohibited from starting college until they'd worked full-time at a job they couldn't stand for at least a year.

Tends to make the student pay a little closer attention to what they're buying and how much they're spending regarding continued education.

Unfortunately, I think Barry O'bama is going to try to fulfill that idea with forcible national service of some kind.

[diet menurunkan berat badan]

Yes, I was stupid when I took my loan expecting that I would be able to pay it off. You're correct: I did not do the research. I should have checked the background of the guy who hired me one day then called back the next day to "apologize" for allowing me to agree to a lower wage than they normally start out with (I agreed to $30,000 twice as much as I'd ever earned in my life), then added that the company will be paying for my moving costs. You're absolutely correct: when the check arrived in the mail and was cleared by the bank, I should have been suspicious tips diet sehat

[engineer]

Wonderful thing about engineering: Provided you actually graduate, jobs aren't all that hard to come by.

[diet]

great. thanks

[KenK]

This is an applicable Dilbert.

Dilberts Mom: Your cousin Laurin just got her degree in English. Can you give her some career advice?

Dilbert: Would you enjoy scratching out a meager living in a frustrating work environment?

Laurin: I've never thought about it.

Dilbert: Obviously

[ChicagoTom]

As to college kids being absolved from the responsibility, no thanks. Exactly how does that prepare them for life?

No one says absolve them of responsibility, but it's hard to say it's all their fault when the system has been corrupted.

When financial aid offices are on the take, I just don't see how we can seriously sit here and say "these fucking stupid kids -- they should have read the fine print better".

These kids just want to go to college not become experts on the ins and outs of student loans. The reason the financial aid office is there is to help these kids navigate the system and to educate them on the pros and cons.

Yet somehow these kids are the assholes in the equation? Sorry I don't buy it at all.

If they don't have the higher reasoning skills to begin with, to ball-park how much they will owe and what their chosen filed will probably pay, then they aren't qualified for college and should be flipping burgers somewhere where they can do less collective harm.

Are you fucking kidding me? You expect 18 year old college freshmen to have these skills or else they are morons? Really? Most adults can't even do that. But typical libertarian -- always thinks he is the smartest person in the room and everyone else is just a bunch of 'tards.

[squarooticus]

I think that was a mistake, because it's driven tuition through the roof more than just about any other factor, but try telling that to Congress.

If anyone has any doubt that an increase in the money supply causes prices to rise, this is a good example in isolation: part of the money supply has been restricted to a particular market, and then increased dramatically; lo and behold, prices in that market have gone through the roof. This is inflation writ small.

[ev]

I have the fortune of graduating from IU in...what is it, 6 weeks? Great time for me to get out, I know.

I think I'll have 20k or so of debt.

I will say one thing; I'm not sure if it's necessarily kids being dumb when they sign for loans. (But 115k? I hope Christ was teaching there). I have legitimately no financial knowledge. There needs to be a mandatory class in highschool/college that goes over finances in The Real World. How loans, morgages etc operate. I know I took a gov/econ class, but we didn't do shit in that class. I'm going to have to give myself a crashcourse over the summer.

[Old Bull Lee]

I will say one thing in favor of cutting these idiot kids some slack:

From kindergarten through high school, kids are told to pursue whatever dreams they have, all they need is hard work. How many high school counselors have ever told kids who are going to pursue degrees in art or philosophy they need some kind of backup career for their useless degree?

I remember parents saying those kinds of things (mine did), but with teachers and counselors it was just dive into whatever frivolous academic pursuit you want.

[Jerry]

How about limiting student loans to those pursuing professional degrees. Thank you.

[kinnath]

If they don't have the higher reasoning skills to begin with, to ball-park how much they will owe and what their chosen filed will probably pay, then they aren't qualified for college and should be flipping burgers somewhere where they can do less collective harm.

Are you fucking kidding me? You expect 18 year old college freshmen to have these skills or else they are morons? Really? Most adults can't even do that. But typical libertarian -- always thinks he is the smartest person in the room and everyone else is just a bunch of 'tards.

[muttrox]

Alan Colinge is a self-obsessed moron. It's sad that he's the one making a fairly reasonable point.

[Menstrual Retardation]

"But typical libertarian -- always thinks he is the smartest person in the room and everyone else is just a bunch of 'tards."

You a painter, Tom? Because I can't think of another profession that works with such broad brushes.

[kinnath]

shit, someone moved the preivew button and replaced it with the submit button.

[Art-P.O.G.]

She's cute. I can think of some ways she make a lot of extra $$$ quickly.

Should've used an Eliott Spitzer gimmick with this post.

[Pro Libertate]

I avoided student loans as much as possible as an undergraduate, so I had the sense at 18 (actually, I was 17 at the beginning of college) that you're saying these kids don't have. I took out some pretty hefty loans for law school, but that's par for the course unless Mommy and Daddy are footing the bill.

I also remember discussing with other students why debt was bad pretty frequently as an undergraduate. At state schools, the kids taking out loans were generally spending that money on things other than education, anyway. My wife has a friend who has bought all sorts of stuff with her student loan money. What about those people?

[Jerry]

@kinnath
What did the English major say to the loan officer?

[engineer]

"Are you fucking kidding me? You expect 18 year old college freshmen to have these skills or else they are morons?"
You mean that $115,000 in debt plus interest would be practically impossible to pay back when your degree doesn't appreciably increase your definite earnings? Uh, yeah. Basic arithmetic skills should be necessary to go to college.

[kinnath]

Yeah, I fully expect an 18-year-old, who has the legal authority to sign a contract, to be a fully-functional member of society.

In addition to the public education system, there are many private organizations that will teach a kid how to survive in the wilderness, how to perform basic first aid, how to get and keep and job, and many other vital life skills.

Junior high school students back in the day were expected to be more self-sufficient than today's crop of new grads.

So yeah, fuck anyone that gets a college degree by borrowing too much money WITHOUT ACTUALLY ASKING ANYONE whether or not it's a good idea.

[jasno]

If they don't have the higher reasoning skills to begin with, to ball-park how much they will owe and what their chosen filed will probably pay, then they aren't qualified for college and should be flipping burgers somewhere where they can do less collective harm.

I think it's this kind of thinking that causes libertarians to be both perpetually frustrated and unelected. Sure, you're absolutely correct - they're adults and they should be held responsible. Nothing wrong with that argument, like many other libertarian arguments.

Now let's put it up against reality. The real reality - not the one that *should* be in-place in the libertarian alternate universe - but the one we're all forced to live in. Kids are dumb. 18 and 19 year olds are dumb. They're poorly prepared by a lackluster public school system, they've had little experience in being held responsible for their actions, and they have very little experience dealing with money - especially a debt larger than any amount of money they've ever had. They don't understand the real world - because they've never been in the real world. They've probably never lived on their own and had to provide for themselves. They're kids.

They're sent off to college, because that's what you're *supposed* to do, right? That's what everyone told them anyway. They'll do whatever it takes to get through it - so they sign on the dotted line. Sure, they'll probably figure out what they've done after a few semesters of economics, but by then it's too late.

So, you're right - they shouldn't be allowed to escape responsibility for their actions. But what about properly informing them of the risks first? What about discussing the alternatives and presenting them with unbiased data so we can help them make the right choice? I know we're libertarians and we all get boners over personal responsibility - but we're not anarchists, and we still live in a society, and it benefits us when our fellow citizens don't make stupid decisions.

I wonder though - why aren't student loans subject to the same kinds of investigation as other loans? I mean, why would anyone give a loan to someone to pursue a doctoral degree in art, unless that person demonstrated a compelling aptitude for it? Why aren't engineering degrees easier to finance? Oh.. government backing... nevermind.

[Art-P.O.G.]

Old Bull Lee speaks the truth! I know, I have a Bachelor's Degree in Fine Art. And lots of ambivalence. Like I've said before, I'm eventually going to community college to study something more technical.

[engineer]

"But typical libertarian -- always thinks he is the smartest person in the room and everyone else is just a bunch of 'tards."

Well, Tommy boy, if it's just you and me in the room, then yeah.

[old engineer]

so is the new engineer that didn't use "engineer" for a handle because I used "engineer" in the past.

[engineer]

jasno,
Don't lump us all together. I'm 20 years old, and smarter than this dumb futz.

[Art-P.O.G.]

But student loan debt is also a great motivator. I probably never would've joined the Army without it. So even though I eventually regret every decision I make, I'm always better for the experience, it seems.

[engineer]

I understand that this handle has gone through a few different users. If it's a real problem, I'll switch. At present, no one else posts as engineer, so I see no prolem.

[T]

You expect 18 year old college freshmen to have these skills or else they are morons? Really? Most adults can't even do that.

College is not for everyone. It is not the 13th grade. If you don't have the snap to figure out that borrowing 115 large on the promise of a degree in Radio-Television-Film or WTFever is a bad idea, maybe you don't belong there.

Seriously. 115,000 dollars. This is a house in many parts of the country, or 20 houses in Detroit. Does the thought of "gee, that's an awful lot of money" never occur to these nits?

[Art-P.O.G.]

Of course my older brother got his degree in Finance. Always did have more common sense than me, that one.

[old engineer]

I understand that this handle has gone through a few different users. If it's a real problem, I'll switch. At present, no one else posts as engineer, so I see no prolem.

No problem . . I just remember someone posting as economist or somether or other explained that they didn't use "engineer" because I was already using it.

I have long since retired that handle and don't plan to go back to it.

[robc]

You expect 18 year old college freshmen to have these skills

My boss, when I worked in Switzerland, was stunned that you could go to a University in the US without taking calculus first.

[robc]

Yet somehow these kids are the assholes in the equation?

Cant everyone be the assholes?

The kids (who arent - they are adults).
The financial aid officers.
The bankers.
The government.

I dont see why they arent all the assholes.

[T]

I probably never would've joined the Army without it. So even though I eventually regret every decision I make, I'm always better for the experience, it seems.

That which doesn't kill you doesn't make you stronger, it merely postpones the inevitable.

[Pro Libertate]

As a parent, I say make the age of majority 30. Kids are definitely maturing slower and have peculiar gaps in their understanding of the real world. That's only a matter of degree, because that was true of my generation as well.

I think people are dramatically underestimating the information that these kids have. They can read, and there are disclosures all over these loan applications. They can also imagine the impact of $100,000 in loans after graduation, especially if they still make the jokes we did when I was in college twenty years ago:

"What's the first thing a political science major (or functional equivalent) hears after graduation? 'Waiter, check please!'"

[engineer]

I personally can't stand the people who complain about how much debt they accumulated in college. I've worked my buttt off in school to get a scholarship and at my job to defray my room and board expenses. And I'm busting my ass in college getting a useful degree. So stop complaining about the consequences of your bad decisons. That is all.

[No Name Guy]

Samantha - Fuck you you whiny bitch.

Let's get this straight: You went to a high priced school on borrowed money for a degree that's worth shit. Now, you expect me (who went to state school, lived at home, lived very cheap and actually earned a degree that pays off - aerospace engineering) to cover your ass for your mistakes?

Yeah - fuck you you entitlement mentality bitch.

[P Brooks]

No one says absolve them of responsibility, but it's hard to say it's all their fault when the system has been corrupted.

"the system has been corrupted"

I love that kind of talk. How? By whom? Why?

-----

Here's a thought experiment: let's say a high school kid really really likes to ski. He thinks it would be groovy to be an Olympic downhiller. Would you advise him to borrow $100k to move to Austria to train?

[kinnath]

I must have been about 10 the first time my father made me buy something myself that I wanted to get. Sure, suddenly I was being paid to do some chores that I had always been told to do. But still, I had to save up and buy what I wanted.

I got my first job when I was 16. My parents stopped buying everything that a teenager needs. I had to pay for my lunches at school, buy my own clothes, and entertainment came straight out of my pocket.

When I quit my first job, they told me to find another one, because they weren't going to start buying stuff for me again.

I treated my kids the same way, I and see them doing it to their kids as well.

There are many, many people to be blamed for the current lack of skills or ambition for teenagers today. But, overall I blame it on the progressive mindset behind "it takes a village" and the other crap that seems to be mainstream parenting today.

I was 25 and married when I started college. And yes, I got federal grants and student loans. But I pay more in federal income tax each year now than I got in total for grants or loans during my 3 1/2 year stint in school.

[R C Dean]

As a 20-something college educated women, she has a bright future as a high-end call girl, which could also be a stepping stone to a highly-visible position in the TV business politics.

Oh, and screw these spoiled kids whining because I won't open my wallet to them.

I borrowed some for my education, not a lot, and knew exactly what I was getting into. Paid it off in five years, and that includes three years of Ivy League law school bills.

[engineer]

"The kids (who arent - they are adults)."
But adults can use the same cop-outs these days. The line is blurring.

[ChicagoTom]

You a painter, Tom? Because I can't think of another profession that works with such broad brushes.

Am I? Really? Maybe you should read the thread -- which seems to validate what I said.

I think people are dramatically underestimating the information that these kids have. They can read, and there are disclosures all over these loan applications.

I remember when I took out loans...I basically filled out the FAFSA -- and then every semester I got an award letter telling me what I was eligible for.

It was broken down into three groups -- Grants, Federally Subsidized Loans (I believe they were stafford loans) and Federally unsubsidized Loans -- to get the loan I basically circled which loans I wanted to take and returned the form to the Financial aid office.

The only "disclosure" on the form was an indication that unsbsidized loans accrued interest from day 1 whereas the subsidized loans deferred interest til graduation.

Hardly enough information to make an educated decision about what the repayment options are going to be like.

I dunno how different it is today, but I got my loans in the early to mid 90s

[ChicagoTom]

I love that kind of talk. How? By whom? Why?

By the lending industry and the willing politicians.

Are you playing dumb? Or does it hurt to admit that the lending industry and their lobby are corrupt.

[kinnath]

My peers at work complain about being college-poor because they have two or three kids in college. They look shocked when I tell them I didn't spend a dime on college for my kids -- my parents didn't buy my college and I'm not buying school for my kids.

They're now in their 30's. One recently got an associates degree and has ambitions for a bachelors degree. But kids and work kind of gets in the way. The other one never got a degree of anykind.

They are certainly in better shape that 2/3rds of the recent college grads who are deep in debt. College is valuable for some, but far from valuable for most.

[Detroit Diesel]

The real problem is that these schools are smarter than the government. The universities, whether state or private are increasing tuition at an exponential rate. They know that they can get the money because all of these loans are backed by the gov't.
Some of you say you worked your ass off to get through school to finish with you degree. Well I did too. I went to school worked as much as I could, I received scholarships and my parents payed for my room and board. I went to school to be a pilot, and before the economy took a dump because of these fucking banks. There was an outstanding market for pilots, where jobs were plentiful and offered great pay before that crash. A crash that which just so happened to be cause by the same bank I now owe money too at the time about a year before I graduated when I was already 100k in debt.
So now that I am working as a logistician and I am paying taxes to bail out these banks, than I believe we as student in debt should be bailed out....and fuck you if you think otherwise

[lc]

I think there are 2 reasonable solutions, instead of this mish-mashy public private solution we have right now.

1) Get the government out of the business of student loans, allow bankruptcy to clear away the debts, etc... Essentially treat students like any other lender.

Since students are generally terrible credit risks (5-10% default rates are steeply in junk bond territory) with basically no collateral, and no earning history, nobody without a co-signer could get a loan at a reasonable rate (say less than 30-40% annually).

This would steeply reduce the demand for expensive 4-year colleges (but would likely increase the demand for trade schools, community college and the like) and you would see a dramatic decline in upper-end college costs as demand dried up.

2) Make college free for everyone, have government pay everything. The government could demand re-payment of the loans, but since the government would basically be offering un-secured credit you would see enormous defaults, huge credit losses in (in the tens of billions annually) and government would basically be providing a huge additional subsidy.

Since the government would not be able to maintain this subsidy indefintely, they would winnow out the pool of students eligible for higher education (like in Europe where you can get a college education for free if you pass the appropriate tests in high school) decreasing demand for higher education and decreasing costs.

In either case we would see a reduction in college expense to a more reasonable level.

When I was in college, one of the alums of my fraternity remarked that in the 70's housebills (payment for food, rent, parties, etc...) were approximately equal to annual tuition. In the late 90's when I attended college. Housebills were about 1/5 of tuition, and I can't imagine the situation has gotten better in the interrum.

[ChicagoTom]

I must have been about 10 the first time my father made me buy something myself that I wanted to get.......

Which is great that your parents taught you the value of a dollar. Mine did too. But that doesn't mean that everyone else has as well. And it doesn't mean that kids that haven't had good examples like this are idiots. Some kids aren't blessed with great parents/role models -- but I guess it's their own damn fault.

[The Angry Optimist]

Which is great that your parents taught you the value of a dollar. Mine did too. But that doesn't mean that everyone else has as well.

So it's a good idea as a feedback mechanism to say "poor baby...you didn't (kind of) know any better...let me cut you a check?"

Please.

Some kids aren't blessed with great parents/role models -- but I guess it's their own damn fault.

Why is it that every liberal appeals to some possibly nonexistent Poor Dumb Bulb who had bad role models, bad parenting and never developed any commonsense?

[ChicagoTom]

College is not for everyone. It is not the 13th grade. If you don't have the snap to figure out that borrowing 115 large on the promise of a degree in Radio-Television-Film or WTFever is a bad idea, maybe you don't belong there.

I love how people are fixating on the 115K number. Just because reason chose one of the most glaring and least sympathetic figures to highlight doesn't mean that is typical.

There are plenty of people who borrowed/owed much less but have been hit with huge penalties and fees when they lost their ability to repay because they lost their jobs or had some other catastrpohic financial event (like a major health problem).

But please keep focusing on that one girl who racked up 115K and pretend like she is the rule not the exception.

[kinnath]

But that doesn't mean that everyone else has as well.

That is the problem, not the student loan program.

If parents fail to raise their children properly, the rest of us to do not have a responsibility to make up for it.

Some kids aren't blessed with great parents/role models -- but I guess it's their own damn fault.

It's not the kid's fault, it's the parent's fault.

We're where we are today, becaue some parents fuck up and it's so sad for the children. So we help out the children and remove the incentive for future parents not to fuck up. So we get more children in sad conditions. And the cycle repeats.

I'm still waiting for the genius to arrive on earth that figures out how to end human suffering without destroying the incentive for people to take care of themselves.

[Gilbert Martin]

"Which is great that your parents taught you the value of a dollar. Mine did too. But that doesn't mean that everyone else has as well. And it doesn't mean that kids that haven't had good examples like this are idiots. Some kids aren't blessed with great parents/role models -- but I guess it's their own damn fault."

Whether someone's predictament is their "own damn fault" or not has no bearing on whether anyone else is responsible in any way for their welfare.

[Sean W. Malone]

Hey Everyone!!

I'm kind of going to spam the boards today with a link to the article I wrote published today by the Ludwig von Mises Institute:

Please check it out and let me know what you think!

Deliberately Misplaced Blame

by... Me 🙂

[P Brooks]

Or does it hurt to admit that the lending industry and their lobby are corrupt.

It doesn't hurt in the least; and you left out those noble caretakers of Our Nation's Precious Yoots, the schools themselves, who are more responsible than anybody else.

The "system" may or may not be corrupt; that actually has no bearing on the responsibility of people to determine, in advance, whether they will be able to repay their loans.

The most effective way to reduce the influence of evil lobbyists is to reduce the power of the government to interfere in every single activity and business transaction.

[ChicagoTom]

Why is it that every liberal appeals to some possibly nonexistent Poor Dumb Bulb who had bad role models, bad parenting and never developed any commonsense?

Why do you want to pretend like they don't exist?

Why is it that ever libertarian thinks "well I did it this way -- everyone should be able to do it that way as well" ? Good for you jackass. Not everyone is you (nor should they be)

[Pro Libertate]

If you have the ability and gumption to make it to college, you should be able to at least somewhat understand that massive debt has consequences. Not that kids can't be stupid, but we don't get do-overs for our other stupid acts, do we?

Anyway, Steven Wright addressed this issue better than any of us have:

I got into an elevator at work and this man followed in after me. I pushed '1' and he just stood there. I said, "Hi, where you going?" He said, "Phoenix." So, I pushed 'Phoenix'. A few seconds later, the doors opened, two tumbleweeds blew in. . .we were in downtown Phoenix. I looked at him and said, "You know, you're the kind of guy I want to hang around with."

We got into his car and drove out to his shack in the desert. Then the phone rang. He said, "You get it." I picked it up and said, "Hello?" The other side said, "Is this Steven Wright?" I said, "Yes." The guy said, "Hi, I'm Mr. Jones, the student loan director from your bank. It seems you have missed your last 17 payments, and the university you attended said that they received none of the $17,000 we loaned you. We would just like to know what happened to the money." I said, "Mr. Jones, I'll give it to you straight. I gave all of the money to my friend Slick, and with it he built a nuclear weapon. . .and I would appreciate it if you never called me again."

[ChicagoTom]

Whether someone's predictament is their "own damn fault" or not has no bearing on whether anyone else is responsible in any way for their welfare.

I'm not advocating for a bailout of these people...but I am advocating for reforming the student loan system.

But I am also not gonna sit here and pretend like all the fault lies with the borrowers.

I mean when financial aid offices are being corrupted with kickbacks and bribes, I'm pretty comfortable with the opinion that the students aren't the most culpable.

[JW]

Are you fucking kidding me? You expect 18 year old college freshmen to have these skills or else they are morons? Really? Most adults can't even do that. But typical libertarian -- always thinks he is the smartest person in the room and everyone else is just a bunch of 'tards.

No, I'm not fucking kidding you.

What's so hard about this? My 3rd grade son can do this math. If you can't multiply your expected annual expanses times 4 (or be bothered to do so), then you are taking up valuable breathing space in that fine institution.

And save the righteous indignation for someone who cares.

[ChicagoTom]

Not that kids can't be stupid, but we don't get do-overs for our other stupid acts, do we?

We dont? Really?

of course we get do overs. The Bankruptcy system is one big do-over. You get to pay off creditors for pennies on the dollar and they can't come after any future earnings or assets gained post bankruptcy. Then you are free to go and start fresh.

[P Brooks]

There are plenty of people who borrowed/owed much less but have been hit with huge penalties and fees when they lost their ability to repay because they lost their jobs or had some other catastrpohic financial event (like a major health problem).

"I so dislike your use of a specific, actual unique case, that I will allude to totally nonspecific cases which I shall now pull directly from my magic hat."

[ChicagoTom]

My 3rd grade son can do this math. If you can't multiply your expected annual expanses times 4 (or be bothered to do so), then you are taking up valuable breathing space in that fine institution.

BULL SHIT.

I guarantee that your 3rd grade son can't tell you his expected annual "expanses" nor can he tell you his estimated post-degree future earnings

And save the righteous indignation for someone who cares.

How about going and fucking yourself instead?

[kinnath]

Why is it that every liberal appeals to some possibly nonexistent Poor Dumb Bulb who had bad role models, bad parenting and never developed any commonsense?

Why do you want to pretend like they don't exist?

On the contrary, they're everywhere. The progress mindset breeds them like rabbits.

Why is it that ever libertarian thinks "well I did it this way -- everyone should be able to do it that way as well" ?

We are all grown-ups and we are all responsible for our own health and well-being. That being said, we form cooperative groups to perform tasks that are too big for an individual to accomplish alone. In some cases, those cooperative groups are call government.

The problem is that some people get this stupid idea in theirs heads that since they contribute to the funding of government, that they can shift all their personal responsibilities to the government.

Good for you jackass. Not everyone is you (nor should they be)

Yes, I'm a raging jackass. The world would function better if there were more self-reliant jackasses and far fewer empathic handwringers that expect government to alter the fundamental human condition.

[P Brooks]

"when financial aid offices are being corrupted with kickbacks and bribes government subsidies"

[kinnath]

But I am also not gonna sit here and pretend like all the fault lies with the borrowers.

Regardless of how fucked up the current system is, the ultimate responsibility always, always remains in the hands of the person with pen in hand ready to sign a contract.

Period.

End of story.

[ChicagoTom]

"when financial aid offices are being corrupted with kickbacks and bribes government subsidies"

Uhmm..what exactly are you trying to prove with this stupid statement? Im not defending the government either....they and the lenders are corrupt

[Samantha Hillstrom]

I blame society.

[Gilbert Martin]

"I'm not advocating for a bailout of these people...but I am advocating for reforming the student loan system."

The only reform necessary is to get government out of the business altogether. It was never a legitimate function of government in the first place.

"But I am also not gonna sit here and pretend like all the fault lies with the borrowers."

People are always entirely responsible for their own actions in all circumstances. No one forced any of them to borrow money to go to college in the first place.

[engineer]

Tommy seems a little tense.

[Art-P.O.G.]

I appreciate the points in this thread but can't help but feel that the vitriol is unneeded.

[kinnath]

Ms. Hillstrom borrowed money she couldn't afford to pay back to buy something she didn't really need.

Now is might be possible that the deck was stacked against her. If the system is flawed fix it. If the people are corrupt, put them in jail.

However, we have no resonsibility to cover her mistake.

[ChiTom\'s psychiatrist]

Patient suffers from inability to control rage. Regularly lashes out irrationally.

[Abdul]

Chicago Tom,

In reference to the student loan scandal you brought up, as I recall, it didn't really affect students all that much. Financial Aid directors steered kids to certain lenders in order to get perks from the lenders (prizes like trips, and sometimes cash) and never disclosed to the students that (1) they had their choice of lenders or (2) the financial aid director had a potential conflict of interest.

The reason I say that this turned out not to be such a big deal for students is that almost all sudent loan lenders offer nearly identical terms because most of the variables are controlled by the government.

If I'm wrong, and there was some harm to students in general from this practice, please let me know.

But the larger point is that the choice of lenders scandal only cropped up after the student had filled out a FAFSA and was willing to take the debt burden on. The underlying debt problem wouldn't change even if there were no shady deals between Financial Aid directors or lenders.

And, if you believe that the student initiating the loan process shouldn't bear the risk if circumstances require a default, who should bear that risk? The lender alone? Becuase they'd never lend. The taxpayers? Don't we do enough to subsizide everyone's education?

[ChicagoTom]

Regardless of how fucked up the current system is, the ultimate responsibility always, always remains in the hands of the person with pen in hand ready to sign a contract.

Unless they are victims of fraud and misinformation.

Which is what happens when the banks bribe the schools and the financial aid offices to craete the create "preferred vendor lists". Many schools had only one vendor on their lists of prefered vendors. It wasn't until 2008 that the DoE announced guidelines that a lender can no longer enjoy status as a school's sole preferred lender.

So maybe it isn't as clear cut as you make it out to be. Maybe there is plenty of blame to go around and maybe just maybe some of these borrowers are victims.

It's not black and white...and anyone who wants to pretend it is is the dishonest one.

[P Brooks]

So what's *your* point?

Did you read the link? This idiot girl, who works as a production assistant (or some such thing) at CNN, put up a whiny blog post, on Anderson Cooper's blog. In it, she freely admits that she borrowed a shitload of money, to pursue a degree which is neither particularly useful nor especially lucrative. Faced with easily foreseeable consequences, she plaintively asks, "Where's MY bailout?"

To which I, and the majority of reasonable people everywhere, rightly say, "If it was up your ass, you'd know where it was."

[engineer]

"Why is it that every liberal appeals to some possibly nonexistent Poor Dumb Bulb who had bad role models, bad parenting and never developed any commonsense?"

Perhaps the liberals who designed the policies are poor dumb bulbs?

[kinnath]

I appreciate the points in this thread but can't help but feel that the vitriol is unneeded.

My 30-year-old daughter is married, has two kids, and borrowed significantly to get an associates degree through the local community college.

She now works full-time and is paying those loans off, all the while making plans to move up to a local college to start the process of getting a bachelor's degree. It will probably take her another 5 years to get the BA.

I have absolutly no fucking sympathy whatsoever for Ms. Hillstrom.

[engineer]

"to craete the create"
Slow down. Breathe. Then type.

[lc]

I had a good friend in college who after graduating from Wellesley took a degree program at Harvard to get some certificate in journalism (I think the additional cost was something like $15,00 on top of her pre-existing college debt).

The first day of the course a publisher came in and told them that the best outcome possible would be a job at one of the large New York publishers that paid $25,000 annually. When asked how one could afford to live on $25,000 annually in NYC with expected tuition repayment and exorbitant rent costs, she stated that you can't and you should expect to accumulate a lot of credit card debt.

People who go into media/publishing, unless they are willfully blind, know that they aren't going to make any money for the first portion of their career.

In many cases they don't care, or they have parents who will subsidize their lifestyle choice.

[Gabe]

take out a credit card from JP Morgan Chase...max it out and then go get yourself a new identity. Read some books on creating a new identity...it isn't really that hard.

[ChicagoTom]

But the larger point is that the choice of lenders scandal only cropped up after the student had filled out a FAFSA and was willing to take the debt burden on.

The FAFSA is required in order to get grants as well as loans. Filling it out is not really "initiating the loan process".

I had to fill out the FAFSA in order to be eligible for grants. Once I got the award letter told me which grants and loans I was eligible for and then you get to choose which ones to accept.

[kinnath]

Regardless of how fucked up the current system is, the ultimate responsibility always, always remains in the hands of the person with pen in hand ready to sign a contract.

Unless they are victims of fraud and misinformation.

In the case of misinformation, to bad so sad.

In the case of real fraud, the only recourse the aggreived party has is to see that the parties that committed the fraud get to spend some time behind bars.

[Fluffy]

ChicagoTom:

Student loans aren't ineligible to be included in bankruptcy to protect LENDERS. They're already completely protected by the federal guarantee. It's to minimize the amount of federal losses.

That's also the reason the program originally was set up to use private lenders, backed up by a federal guarantee - because then the private lenders put up all the cash, paid for by the repayment cashflows, and the federal government's only expenditure is the amounts it has to pay out when someone defaults.

I mean when financial aid offices are being corrupted with kickbacks and bribes, I'm pretty comfortable with the opinion that the students aren't the most culpable.

Sorry, although I agree that the student loan lenders are rent-seekers who are as corrupt as anyone else who mooches off the state, I don't agree with this. The financial aid officer at a college is no different from the lending and leasing girl at a car dealership. Their job is to help you pay for a product their employer is trying to sell. They aren't your agent, and I really have no patience for the lefty sentiment that they somehow should be. The left is determined to define every payment received for any kind of customer acquisition or sales activity in financial services as a "kickback", and that's just crap. If you don't get good offers for loans from your college's financial aid office, pick up a Yellow Pages and call 3 other lenders and see what offers you get. I don't have a lot of sympathy for "I didn't realize how much debt I was taking on", and I have even less sympathy for "I didn't do the two hours of comparison shopping it would take to know if I was getting a good deal, but it's someone else's fault I paid a higher rate".

[ChicagoTom]

Did you read the link?

Mr Brooks, you seem to be misunderstanding my point.

I don't give a rats ass about Ms. Hillstrom. And maybe she is a bad actor. But that doesn't change the fact that the whole student loan system is flawed and corrupt.

Where I part ways with most on this board is in assuming that EVERY student that is in over their head has no one else to blame but themselves.

It must be nice to live in a world where everything is black and white. It really makes things simple I suppose. Too bad reality isn't black and white, regardless of how many libertarians would like it to be.

[ChicagoTom]

The financial aid officer at a college is no different from the lending and leasing girl at a car dealership. Their job is to help you pay for a product their employer is trying to sell. They aren't your agent, and I really have no patience for the lefty sentiment that they somehow should be.

BULLSHIT.

That isn't how they are portrayed to the students.

The Financial aid officer is promoted by the school as a resource for the STUDENT to help them navigate and get the best deal and find ways to help them pay for college.

They are presented as an agent of the student not an agent of the lender.

[kinnath]

Where I part ways with most on this board is in assuming that EVERY student that is in over their head has no one else to blame but themselves.

Duh!

It must be nice to live in a world where everything is black and white. It really makes things simple I suppose. Too bad reality isn't black and white, regardless of how many libertarians would like it to be.

The world is full of colors as well as shades of grey. That does not mean that the rules we live by need to be complex.

[Pro Libertate]

I have a problem absolving legal adults of responsibility for entering into agreements. We have set the age of majority at 18, for good or for ill. If we think that age is too low, let's move it up.

The difference between requiring adults to be responsible for their mistakes--the libertarian view--and in compelling all of us to finance their mistakes is a fundamental one. I did a lot of stupid things when I was younger, but I believe it is immoral to compel everyone else to pay for those mistakes. Not to mention, what about the nonfinancial errors?

I'm onboard with taking away the special status of student loans and reducing them to what they once were--unsecured loans plus. Lenders used to be willing to gamble on these loans when they were relatively low risk--like for medical and law school students. They'll probably be okay with lending money at higher rates to undergraduates. However, without subsidies and special treatment under the law, it's hard to image that they'll be willing to lend the amount of dollars they do today.

The fraud argument is a little weak. The amount of the loan, the APR, and the term are all fully and clearly disclosed. Whether there's kickbacks or other shenanigans going on doesn't free the borrower of responsibility. I agree with CT that kids should be able to rely on student aid advisers, but they really can't. Fraud or no fraud, university administrators aren't the people to trust when making financial decisions. They want your money, whatever the source, and they cannot be held to have a fiduciary duty to students.

I note that this argument applies to mortgage borrowers as well, despite the bad actions of government and lenders.

[Gilbert Martin]

"Student loans aren't ineligible to be included in bankruptcy to protect LENDERS. They're already completely protected by the federal guarantee. It's to minimize the amount of federal losses."

Yeah - the same reason that federal income tax liabilities aren't dischargable in bankruptcy.

[JP]

She's going about this the wrong way. What she needs to do is bring some more misery on herself, file chapter 13, etc. etc., and then write a "Nickle-and-Dimed for Kollege Kids" and go on NPR and such. And then get a spot guest-hosting for Nancy Grace.

[Sean W. Malone]

Hey Everyone!!

I'm kind of going to spam the boards today with a link to the article I wrote published today by the Ludwig von Mises Institute:

Please check it out and let me know what you think!

Deliberately Misplaced Blame

by... Me 🙂

[TrickyVic]

""""When I signed my student loan papers, I don't remember hearing that I had to pay them back in 10 years after graduation. Of course the responsibility rests upon me."""

What a lot of people don't know is that when you consolidate your school loans they automatically increase the term to 20 years. That's how you get the lower rate they advertise. They wouldn't have said anything when I consolidated my school loans if I didn't ask. They will, and I did, move it back to a 10 year term if you request.

[Pro Libertate]

Nancy Grace. Is there anything worse than her on TV? Jesus, and to think that hack was a prosecutor once.

[Margaret]

Just an FYI for people who are currently facing a huge student debt burden:

Starting July 1, there are 2 new programs that could make loan payments more manageable.

The first is called Income-Based Repayment (IBR), a new payment option for federal student loans, and it's designed to help keep monthly payments affordable with caps based on your income and your family size.

There's also a new program called Public Service Loan Forgiveness, designed for people who work in nonprofit, government, or other "public service" jobs. Public Service Loan Forgiveness will forgive remaining federal student loan debt after 10 years of qualifying payments.

For more information on Income-Based Repayment and Public Service Debt Forgiveness, check out IBRinfo.org, a site from the private, nonprofit Project on Student Debt.

[JP]

and to think that hack was a prosecutor once

As an aged colleague once told me, "Prosecutors are lazy, untalented, and self-righteous."

[Fluffy]

BULLSHIT.

That isn't how they are portrayed to the students.

The Financial aid officer is promoted by the school as a resource for the STUDENT to help them navigate and get the best deal and find ways to help them pay for college.

They are presented as an agent of the student not an agent of the lender.

The student may perceive them that way, but that is [again] their error.

If you went to buy a house and the builder had an in-house mortgage officer, would you assume you were getting the best deal in the marketplace, or the best deal for the builder?

If you went to buy a car and the dealer had an in-house auto finance person, would you assume you were getting the best deal in the marketplace, or the best deal for the dealer?

In both cases, would you assume that the primary concern of the person you were dealing with was making sure that you bought the house or the car, and that they would put you in whatever financing made that happen?

I realize that Americans have a cultural tendency to refuse to look at themselves as customers in an educational context, but I don't have any sympathy for that tendency.

Your statement would make sense if you edited it to say:

The Financial aid officer is promoted by the school as a resource for the STUDENT to help them navigate and get the best deal and find ways to help them pay for college.

[JW]

So, you're right - they shouldn't be allowed to escape responsibility for their actions. But what about properly informing them of the risks first? What about discussing the alternatives and presenting them with unbiased data so we can help them make the right choice? I know we're libertarians and we all get boners over personal responsibility - but we're not anarchists, and we still live in a society, and it benefits us when our fellow citizens don't make stupid decisions.

To be honest, if she wasn't asking for a handout on account for own complete and total lack of foresight, then I probably would *some* sympathy for her. And, you are absolutely right that 18 year olds don't have the wisdom and knowledge of older adults.

But, so what? What if this were a sob story that she didn't understand the consequences that her heavy drinking and now, a family of four or her carload of friends were now dead? Would we still have the same level of sympathy? Would we still be expected to suspend disbelief and that she slept through every fucking, endless DARE class during her primary education? Her parents never talked to her about drinking and driving?

Sorry, but I'm not buying her claims of youthful cluelessness.

[JW]

How about going and fucking yourself instead?

Aw Tom, it's so touching when you show how much you care.

Yeah, you convinced me how right you are with that statement. How could I have doubted you?

[SugarFree]

Hillstrom can't be doing too bad. It sure doesn't look like she misses many meals. (She's on the right.)

[Pro Libertate]

JP,

No kidding. But even by prosecutorial standards, she's scum floating on the surface.

I'm a little disturbed by the idea of government employees getting loan forgiveness. Why should they get special treatment?

[JP]

Sugar -- Don't you know? That's simply further proof of her plight. Only rich people can afford to be thin in America.

[TrickyVic]

"""The fraud argument is a little weak. The amount of the loan, the APR, and the term are all fully and clearly disclosed.""""

The amount of the loan isn't really known until you finish school since tuition can go up by the semester. You don't really know what the cost will be before you commit. The APR is often variable, so the terms can be a little iffy. It was basically like signing a loan for a to-be-determined amount at an unknown interest rate. My approach was to determine if I could handle a payment if the cost rose 20% @ 7% interest. Ends up I under estimated the cost and over estimated the interest but it ended up really close to my actual payments.

When you have people loan money who's performance is viewed by how many loans they move, honesty goes by the wayside. The best way not to move product is to scare the customers away. Borrowers know not to scare the lender too. The system works by each side BSing the other to make the deal happen.

[dhex]

"It's not black and white...and anyone who wants to pretend it is is the dishonest one."

there are probably some obvious instances of fraud (in terms, if not just funneling to a single lender in exchange for kickbacks), but the larger issue is indeed black and white. either you do the math beforehand or you don't. i did the math while still in high school, which is why i went to the school that offered me the most free money.

[SugarFree]

Aw shit, JP. That's right. I forgot the dominant narrative paradigm.

[TrickyVic]

""""There's also a new program called Public Service Loan Forgiveness, designed for people who work in nonprofit, government, or other "public service" jobs. Public Service Loan Forgiveness will forgive remaining federal student loan debt after 10 years of qualifying payments."""

Great, I work for a non-profit but my loan is only 10 years. ;-(

I'll have to look into.

[Sean W. Malone]

eek - sorry about the double post back there, but hey - I do have one minor contribution to this discussion.

And that is:

The rent-seeking/government backed nature of the Student Loan system has made getting an education extremely expensive - especially an advanced degree.

For example, I have over 100,000 dollars in debt from a Masters Degree (in Music even) from New York University. However, first off, I do make an ok living and for the time being am paying what I need to pay...

BUT... I want everyone to consider two or three things here:

1. Musicians and certain other people who wish to be successful at the upper levels of their industry without counting on miraculously getting a bazillion dollar record deal need significant training. This takes time and money and because no one takes "apprentices" anymore, there's no realistic way of doing that without going to a graduate school.

2. Graduate school is insanely expensive largely, if not almost entirely, due to our government's "everyone can go to college no matter what!" type policies.

3. I can tell you with a significant amount of certainty that the lifestyle I'm living right now is thoroughly lower-middle class bachelor (roommates, tight budget, etc.) and without my masters even that would not be possible in the industry I most want to work in.

So... To do what I want, I needed the degree (more importantly the access to the level of mentors you find at NYU) I have - the cost of the degree is enormous in large part owing to government policy - and I had no real way of avoiding it but by completely changing my line of work, which would have made me miserable.

Now. I am not asking for my loans to be wiped clean - but I think we do need to have some consideration for why the $100k+ loans even exist.

Plus, from a purely selfish standpoint, I have to also say that I'm not going to see a dime of social security money though I pay in just like everyone else, and I barely use any government services and disagree (as most of you all do) with about 99% of spending in the US... so to an extent - getting all the taxes I'll be paying in over the next 50 years back in the form of a giant subsidy for my education would really only feel like a bit of served justice.

[J sub D]

I'm interested at what age posters think a person should be held legally responsible for contracts that they've signed should be.

Chicago Tom and Sean W. Malone, feel free to chime in here.

I'm going with 18.

[dhex]

i got my masters at baruch. only 10k. paid for my by employer, by and large. woo!

[TrickyVic]

"""I'm interested at what age posters think a person should be held legally responsible for contracts that they've signed should be."""

The age at which society thinks you're responsible enough to drink alcohol.

You knew it was coming.

[Pro Libertate]

Thirty. Same age our descendants will go to Carousel.

[engineer]

"only 10k"
I hat you.

[engineer]

Then again, what was it in?

[Sean W. Malone]

17

[Sean W. Malone]

HA! My "tags" didn't work... was supposed to be:

< chef >
17
< / chef >

[Stormy Dragon]

I share the same anxiety as the families struggling to pay their mortgages.

I doubt that. No one is going to foreclose on your brain if you fail to make your student loan payments.

[Fluffy]

Sean,

Here's the problem with your post:

There's some other guy out there who thought about going to a succession of private schools in Manhattan to pursue his dream of a career in music, but who decided not to because it would be too expensive.

To let you out of your loans, we'd have to tax that guy to get the money to pay off the federal guarantees.

[Pro Libertate]

Seventeen?!

Dr. Monroe: My, uh, studies establish without a shadow of a doubt, that children are, by adult standards, insane. And more than a little immature!

Johnny: And that's bad?

Dr. Monroe: Well, sure.

Johnny: Well, so what should we do about it?

Dr. Monroe: Round the little guttersnipes up.

Johnny: So, tell me, Doctor. Wh-where did you receive your degree?

Dr. Monroe: In Long Beach, California, Doctor.

Johnny: Long Beach State College.

Dr. Monroe: Oh, ho-ho. No, no, no, no. From a man at the Casa de Soma Apartments.

[Sean W. Malone]

But... also... we also can't have the government constantly socially engineering everything.

It's hard for me to 100% say that "well, you just shouldn't have bought that house" when all the pressure from government is there telling people A. they should, B. it's a great time to buy, C. if you screw up they'll cover your ass, no problem, and D. don't think about it too much...

Same goes with Student Loans. When we have every pressure imaginable going "everyone go to college!" and "don't worry, you won't have to save up for it, we've got you covered!", and because of that prices are interminably high....... let's not be surprised when the college market is flooded with demand, shall we?

And those of us who would have gotten a graduate degree either way are kinda screwed by the cost. That wasn't my doing... I've accepted my debts, but seriously - they wouldn't even be as high as they are without government intervention, so are you really going to call me an idiot for it?

[Pro Libertate]

See my first post on the topic, Sean. Tuition is out of whack and out of any relation to the market.

[kinnath]

. . . when all the pressure from government is there telling people . . .

There is no government, there is only us.

We hire some people to adminstrate tasks that we think the entire community should benefit from and should therefore contribute too.

Somehow the hired help becomes more important than us . . . they begin to think on their own and tell us how we should live. Amazingly enough, many of us decide that's a good thing.

At least when the cyborgs take over, they'll be rational.

[engineer]

"There is no government, there is only us.
We hire some people to adminstrate tasks that we think the entire community should benefit from and should therefore contribute too."

That's a nice ideal, kinnath. Except that's not how it works. The majority (or sometimes a powerful minority) puts a government in place, and everyone gets screwed to varying degrees by it.

[Sean W. Malone]

"See my first post on the topic, Sean. Tuition is out of whack and out of any relation to the market."

Sorry - I haven't read the entire thread... at work, plus pimping my article over at mises 😉

You know... this one: Deliberately Misplaced Blame

[kinnath]

Somehow the hired help becomes more important than us . . .

Read the whole post, engineer in training.

The representative republic the founders gave use was intended to be the hired help.

As time went on, do-gooders discovered they could use the power the state to change the people.

At the same time, evil-doers also discovered they could use the power of the state for personal gain.

Unfortunately, the do-gooder and the evil-doers are frequently the same people.

[engineer-in-training]

kinnath,
I cry your pardon, engineer-in-practice. I was hasty. I forgot the face of my father, and am properly shamed.

[kinnath]

As long as you learned a valuable lesson, you are forgiven -- this time 😉

[P Brooks]

We hire some people to adminstrate tasks that we think the entire community should benefit from and should therefore contribute too.

People look at me strangely when I tell them the President should be held in exactly the same esteem as any other idiot we pay to do the jobs we don't want to do ourselves, like pumping out septic tanks.

I don't know when the President became our Savior and Master, as opposed to some bozo merely doing a job. I really wish we could switch back.

[R C Dean]

Some kids aren't blessed with great parents/role models -- but I guess it's their own damn fault.

Its certainly not mine. Why should I get stuck with the bill?

See, the burden of proof is on you, ChicagoTom, to demonstrate that I should bear this cost, not on me, to prove why I should not.

[P Brooks]

"some bozo merely doing a job"

should be read as, "one among many thousands (if not millions) of similarly skilled bozos who could do the same largely menial and mundane job as well, if not better"

[Chuck]

The student may perceive them that way, but that is [again] their error.

It's not the student's error when financial aid offices explicitly portray themselves as such a resource, which most do.

[engineer]

"See, the burden of proof is on you, ChicagoTom, to demonstrate that I should bear this cost, not on me, to prove why I should not."

No it isn't. What is this "burden of proof" you speak of? Everybody knows that if someone hurts the government has to move (an aside: who said this?). Questions about personal responsibility and the prudence of the policies be dammned!

[Dr. K.]

The only "disclosure" on the form was an indication that unsbsidized loans accrued interest from day 1 whereas the subsidized loans deferred interest til graduation.

You also signed at least a promissory note somewhere along the way.

I know by the mid-late 90s, when I was getting my student loans, we had to sign a new promissory note every year, complete with Truth-in-Lending disclosure. Anyone complaining that they did not know the terms of the loan or the repayments has only themselves to blame.

Not realizing that coming up with $1,000/mo for student loans with with a BFA would be grueling is a different kind of ignorance, but that doesn't seem to be what you're complaining about.

[NLE]

I don't see where the bailout is needed, and arguing for or against one is a redundant exercise in semantics.

Some people here may not like it, but reinstating bankruptcy protection is a no brainer, preferably after 5-10 years out of school.

Yeah kids are told by everyone to go no matter what, but they are also told not to depend on their classes solely for future worth. I went to college with the main purpose of finding ways to pad my resume, and that's what i did.

The truth is, and i don't know why im bothering to mention it here, that the economy is different now. The rewards and benefits for getting any degree are no longer there, and no, i don't expect an eighteen year old to know this. Nor do i think it's beneficial to hound them for the rest of their lives for money they can't pay, shit happens, and people go bankrupt. I'm sorry if some asshat doctors and lawyers abused the system, but that doesn't strike me as reason to treat the whole swab of college graduates with the same punitive brush. I would think from reading this blog and mag that it's a given docs and lawyers are assholes.

Maybe it's just something i think, but capitalism seemed like the place where you could fail, pick yourself up, and start again through hard work and lessens learned. I see no reason to perpetual punish those who make mistakes, at a young age no less, or suffer setbacks, to say other wise strikes me as pretty unlibertarian.

[Genus]

You could just not be a dumbass and get a scholarship, like I did. Yes I'm bragging, but you could do it too.

[NLE]

P.S.

DRINK INTO OBLIVION

[Sean W. Malone]

Genus | April 8, 2009, 6:47pm | #

You could just not be a dumbass and get a scholarship, like I did. Yes I'm bragging, but you could do it too.

Out of curiosity - was your handle supposed to be "genius"? 😛

Don't kids sell dope to put themselves through college anymore?

[John-David]

@ NLE | April 8, 2009, 6:45pm | #

+1

[NLE]

Don't kids sell dope to put themselves through college anymore?

I others selling drugs to pay off their loans, but that wouldn't work for me. I've read too many of Balko's posts, and i have dogs.

[Gabe]

ex-Students should find good ways to welch on the loans. If more peopel do this fewer loans will be made and the college tuitions will decrease.

[Zmont]

The issue here is that students loans are treated unlike any other form of debt. It is absurd to treat an 18 year old who got a liberal arts degree differently than deadbeats who run up 50,000 dollar credit card bills. Either individual bankruptcy protection is needed or it isn't But putative punishment against student loans is ridiculous

[Yes I was stupid at 18]

But what the government did not disclose to me was when I consolidated my loans in the mid-90s (to reduce the amount of paperwork I had to do and checks I had to write) was that I was locking in 8% interest FOREVER. I was never informed that I would NEVER be able to refinance my student loan debt again. 8% for 30 years. At least home owners can refi. I'm fucked.

[ok]

So what you're saying Zmont is if we were consistent in our wrongs it would make a right.

Look on the bright side. The coming hyperinflation will practically eliminate your debt.

[mac wildstar]

I see the poster just like many others, just doesn't get it. He asks why hard working people should have to bail out the students? Instead he should be asking why taxpayers are bailing out corporate CEO's, and all the thousands of people who have filed for chapter 7, or 13 bankruptcies in the last several years. We are all paying for those already.

The poster does not understand that Student loan defaults are caused by more than just borrowing more than you need for school. There are many circumstances where a person is hit with something unforeseen, such has hurricane katrina where they lost everything and had to start from scratch, which caused them to go into default.
Still others experienced unforeseen medical disasters. And these people have no way out.

Then there is the fact that the student loan industry has changed over the last 20 years. Even today I still get report and have seen the paper work where full disclosure is not made on the application. And in years past, before the first reforms in 1992, many schools were involved in what congress called "student loan farming", and they even have congressional testimony acknowledging that these schools left students with worthless educations and bills (student loans) that they could not pay.

Now go ahead and ignore the fact that I can go run up 100k in credit card bills, file bankruptcy and pay pennies on the dollar. But not with student loans.

Ignore the fact that many people are filing bankruptcy on their OTHER bills, just so that they can have enough to make the student loan payment. That means we all pay for it anyways.

so does it really matter if we are paying for their loans by subsidizing their credit card payments, their home loan payments, or some other discharge able debt payments?

The fact is student loans are the most predatory financial scam currently in the USA. It preys on young people who are desperately trying to get ahead in a world that was supposed to be better for them, but in reality, is worse, as they are being forced to inherit higher tax rates to pay for government overspending.

Many of them are told that if they do not go to college they will end up flipping burgers at some burger joint, or get stuck in a dead end job with no hope for a real future. So they go to college and hope when they get out the jobs will be there. Add NAFTA and you get the picture. The jobs are NOT there and they get stuck with bills they cannot pay.

Student loans are the ONLY kind of debt you cannot discharge in bankruptcy short of being dead, or a drooling vegetable in a wheel chair. As such people who find them selves in default consider themselves to be debt slaves.

There is absolutely NO legitimate public interest served by creating a caste of permanent indentured servants (slaves) who can never get out of debt, never invest in our communities, never have the kind of life this country has promised to those who do all the 'right things.'

Although it seems as if it crept up on us, student-loan indebtedness is not an accident but a policy. It is a bad policy, corrupting the goals of higher education. The world we inhabit is a good one if you are in the fortunate third without debt, but not nearly so good if you live under its weight. Student debt produces inequality and overtaxes our talent for short-term, private gain. As a policy, we can and should change it.

This system is predatory by design and as a result it's virtually impossible to pay it all off. For example, you can take out a loan for 40,000 and after the loan has accrued the amount you owe will be roughly 3 times what you borrowed. Essentially what happens is that the interest is capitalized and the debt grows exponentially. This system makes it rewarding or profitable for a lending institution or guarantor when a borrower defaults - and that is not what the original intention of the Higher Education Assistance law was intended to do.

[Jonas]

What I don't understand is why this girl apparently has no one to appeal to except the government? I'm assuming she has family... can they not help deflect some of the cost? Why doesn't CNN, who employs her, offer to work out some sort of deal to help out their employees cover their student debt? I imagine they can afford to assist.

I love how people who talk about how the government can afford to be charitable never bother to see who else, the people actually involved in their lives, can afford to be charitable. I'd think that most people have somewhat well-to-do people in their circle of friends and family with more of a vested interest in their well-being than the taxpayer.

Why is grovelling for money from your friends or family or employer MORE traumatic than grovelling on the Internet for a bailout, where millions of people can see, who will then criticize your poor financial decisions?

[dhex]

Then again, what was it in?

corporate communications aka pr.

overall it's been worth it just in the short term, if only due to the raises.

The fact is student loans are the most predatory financial scam currently i the USA.

worse than loan sharking?

wow.

[there's a social security joke to be made if you like. just ask.]

[JB]

If someone aborts this dumb bitch and I'm on the jury, I will vote to acquit.

What an absolute retard.

[engineer]

Anyone wanna try and dissect the load of steaming populist bullcrap posted by mac wildstar?

[Zmont]

"So what you're saying Zmont is if we were consistent in our wrongs it would make a right.

Look on the bright side. The coming hyperinflation will practically eliminate your debt."

If there is any sort of argument for personal bankruptcy (and there are) then it applies much more to student loans than it does profligates who run up huge debt every 7 years. Yet the former are protected and the later aren't. That's ridiculous policy

[Basement dweller]

Samantha may not be a financial whiz, but fortunately she has
other things going for her.

[Buried for life]

I think my story is similar in kind if not in quality to those of us whose lives many blogging here want to throw on the trash heep. My parents came from extremely poor back grounds, my dad worked his way into the middle class with an AA degree. Great for him. I went to a state school at first and did not run up too much SL debt, but then took the LSAT and did really really well. I was accepted in the state school that would have paid my way. But also had a chance to go to a top tier nationally prominent school. You know the brouchures said that their graduates made in the 80's when they graduate, all you had to do is well in school and graduate. Sure I would end up with 80,000 in debt but I had family making a lot of money, I had a fall back opportunity to possibly open my own practice due to the family connections, and the school was very very presetigous. When I grad, there were very few 80000 jobs available due to the economic down turn in the early 90's so I went to my fall back position. Every thing went well for three or four years, but then death, disability, divorce, economic collapse, real estate bubble burst leaving everyone, not just my family, over leveraged. My office collapsed. I ended up for a few years driving tour buses, selling used cars, etc, usually a little behind in my rent and unable to get back to paying the loans before forbearances ran out, the loan defaulted and the lender TRIPLED the loan to 180000 at 9% interest it is now 260000. I am no longer in default, but I have never been able to even make the interest payment so it keeps growing. Not to mention the private student loan that has refused to negotiate a rehabilitation, so that they can continue to collect a 20% collection fee (by the way the collecter is owned by the private loan company, so they are really getting a whopping 24% interest). Yea retrospectively it was stupit move to think I could climb out of the middle class and into a really lucrative career. I should have known better then to try. If there simply were the standard bankruptcy protections that existed when I started school and took out my loan, maybe I could save for my son's education now. He is two, and I will NEVER let him borrow to go to school.

By the way my private lender is in bankruptcy renegotiating its way out of its bad decisions, and by the way the corporate CEOS with their massive bonuses that made those bad decisions are not going to have to pay for the mistakes that cost us tax payers and consumers. Do you really think it fair that my one 75000 mistake should cost me my financial life, and my sons education???

[Abner McGillicuddy]

Geez, Buried, ya want some cheese to go with that whine?

Just who is it that's supposed to pay your bills?

[Brian Galloway]

I've paid back over $100,000 on an original loan amount of nearly $65,000, but as of today I (allegedly) owe just over $166,000. There's no legitimate reason why my balance shouldn't be zero, or very close to it. When I signed the loan documents, I had no indication this was a possibility; nothing I read or was told let me to believe I could actually be an indentured servant for life. And yes, I've been making payments for years.

Harvard Professor Elizabeth Warren was quoted in a Wall Street Journal article as saying that "student loan debt collectors have power that would make a mobster envious."

[Brian Galloway]

McGillicuddy says "Buried, ya want some cheese to go with that whine?"

Whine: To utter a plaintive, high-pitched, protracted sound, as in pain, fear, supplication, or complaint.
To complain or protest in a childish fashion.
To produce a sustained noise of relatively high pitch: jet engines whining.

I don't hear/read any whining here. I'm seeing is what people in a democratic country do: discuss issues of public policy and debate the best course of action.

The issue is this: are the laws governing the student loan industry good for society or does the industry need to be reformed?

[Brian Galloway]

Law regulates behaviour either to reinforce existing social expectations or to encourage constructive change. Laws must also be subject to the needs of individual justice, hence the development of equity. Which leads us back to the question of why consumer protections, including bankruptcy, aren't available to student loan borrowers.

The primary purpose of the laws of bankruptcy are: (1) to give an honest debtor a "fresh start" in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has the means available for payment.

Since this is available in all other forms of consumer debt, why not student loans? The courts have rules and procedures in effect to make sure creditors aren't being defrauded. But what about purpose #1? That isn't barely addressed in current student loan laws, except in the most restrictive way possible.

[buried]

Abner,

You really don't get it do you. Who do you think is going to pay for the top tier schools for poor and lower middle class, or are you among the elite and don't want any more uppity middle classers competing with your kids.

We have system that preys on the weak. When tragedy happens they get hit, as I did with punitive interest and penalties, and guess what, we are the actual profit in the system, the system depends on defaulters in order to make larger profits in the long run.

So lil' abner, you want to trivialize the issues, make them only about my story which is just representative of what the system does to many, that is fine, but I rather think like a woman on the news I saw once --she said about the home mortgage crisis: "Surely Americans would not have created a system to screw over other Americans like this - would they?" I think most Americans, once they understand the brutality of the system that has been created, will not want to be a part of it. Most Americans do not want to screw over other Americans or create a system that does - at least I hope so.

[Abner McGillicuddy]

"To complain or protest in a childish fashion."

Sounds about right to me.

[mike_twincities09]

Full disclosure: I have a defaulted student loan for over $60K. My wages are being garnished.

Responsibility lies with the borrower. Yes I accept my mistakes. What I do not accept is the draconian methods by which private collection agencies lied and cheated to coerce me to contact them regarding a "settlement." Then after said contact, immediately slapped me with the garnishment.

Why couldn't I pay? The monthly payments were way too high (~$800/month) and although I negotiated with the D of E to lower the payments, their staff were so inept that they buungled the paperwork. Further, I had hospital bills to pay, they took priority.

Whining? No, I am not whining. I am just mad as hell.

Out here.

[Brian Galloway]

Here's an interesting comparison: nearly all U.S. Federal crimes have a statute of limitations, beyond which that crime can't be prosecuted. The exceptions are those that involve murder and forms of espionage, along with a few very serious civil infractions.

But not student loan borrowers! There's no statute of limitations for us. We're put in the same category as the Jeffrey Dahmers, Charles Mansons, and the George Trofimoffs (25-year spy for the KGB) of society.

Why are student loan borrowers treated worse than most criminals? Even fines for criminal behavior can be discharged in bankruptcy far more easily than student loans.

What is the public policy reasoning for this?

[Abner McGillicuddy]

"What is the public policy reasoning for this?"

I dunno, old bird.

I really dunno. Perhaps you might want to ask why a bunch o' geniuses decided you needed vocational trainin' this'a'way.

Now buried there (i'm a not a'sure that's hiz name, but..) , he's a' 'mplainin' that he has a degree from a top tier law school but can't git hisself a job 'cepting driving tour busses.

Now Ahh ast yez, whut kin'o' loozer kent git hisselll a jeerrrb in the laww a with a degree frum a top tier law skkooll.

Fuck off losers. Come and bitch to me me when you're actually suffering.

[ohmygosh its josh]

I take home 1200 a month. Cost of living here, for a basic apartment, and your utilities, food, etc, is about 1000 a month. No car payment.

Dept of Ed wants 800 a month. Show me one place where someone in america can live on 400 a month.

Sorry, this is not whining. Its dealing with facts. Fact is, higher paying jobs we expected to be there are not, so we are stuck with this debt that doubles the moment it goes "default". And that just makes a bad situation that much worse for the borrower.

There must be some kind of a reasonable solution. No one has offered any.
Why should students be forced to pay back 3,4 and in some cases 5 times what they borrowed?

I've see news articles about people buying used cars that pay 29 percent interest, and those folks end up getting help from the attorney generals office. Loan sharking they call it.

Well, student loans are no different, yet the government and media think they are..

Ok. come repo my education. The only thing I really got out of it, after 2 years of so called trade school, was the fact that I made a mistake when I signed the paperwork. They sold me a dream, which in reality was a nightmare.

All I want is a chance to start over. I live cash only. No credit cards, no other debt. Yet my pay scale will never go above 2k a month (before taxes) because I have to constantly switch jobs to avoid garnishment and other embarrassments.

[Brian Galloway]

Abner says "I really dunno. Perhaps you might want to ask why a bunch o' geniuses decided you needed vocational trainin' this'a'way."

That's a useless comment and adds nothing to this discussion. Every law that's passed is based on some kind of public policy. In a free society, we have the right and the obligation to question what our elected officials do and why.

[Brian Galloway]

Here's the link to an excellent report on the state of the student loan industry:

http://www.studentloanborrowerassistance.org/uploads/File/TooSmalltoHelp.pdf

This is the kind of mature discussion that's useful. Not comments like "fuck off losers." We're adults and can do so much better than that.

[JimAtLaw]

Chicago Tom wrote: "I don't understand why, if the government is going to guarantee the loans (principal and interest at that), the gov't doesn't just give the loans out themselves. Why have a private entity/middle man taking a cut?"

Because who's going to fund congressional campaigns if not SallieMae? Our system of government has become so fundamentally corrupt as to be unrecoverable.

[menda]

College and/or vocational training should be free for everyone to pursue their interest or dream or aspiration; period. That is the only just, moral, and kind way of funding education. As for the present, standard consumer protections need to be restored to all student loans in order to provide relief for the people and keep the banksters and college administrator fatcats from profiting off the misery of dragging young people into usury.

[HooNoce]

Yes, I was stupid when I took my loan expecting that I would be able to pay it off. You're correct: I did not do the research. I should have checked the background of the guy who hired me one day then called back the next day to "apologize" for allowing me to agree to a lower wage than they normally start out with (I agreed to $30,000 twice as much as I'd ever earned in my life), then added that the company will be paying for my moving costs. You're absolutely correct: when the check arrived in the mail and was cleared by the bank, I should have been suspicious. I should have hired an investigator with it instead of giving up my job and apartment and heading out on the trip across three states. How could I have been so stupid as to believe that the guy who hired me and sent me the money really new what "Masters" degree meant. If I'd hired that investigator I may have discovered that the guy who hired me was actually a horse wrangler (literally, he taught horseback riding to troubled youth and did HR work in his spare time) who happened to be married to the boss's daughter and was given the job so he could support his family. Of course, it's my own fault that I didn't question him about HIS qualifications to discover that he didn't even know the difference between a Masters degree and a Doctoral degree. How stupid of me to blindly expect that the housing I was told was waiting for me on the premises would not depend on how many people are in my family (I'm a middle-aged divorced woman whose children are grown and living on their own).
Okay, okay. I except all responsibility for not being to force anyone to hire me for the six months I lived in my car after that stupid decision to take a high(er) paying job in another state which ended two weeks after my arrival after my new boss accused me of lying to him about my degree (I guess the people in the Unemployment Department were as stupid as I was when they said "He's an idiot. The copy of your resume clearly states you have a Masters degree, not a Doctoral degree").
Yes, it was my own fault for taking a job that offered lower pay but promised the required two years of supervision so that I could become licensed. It's my own fault for not knowing the director was actually planning on retiring and that the new director would decide to phase out all of the new unlicensed workers because eliminating the supervision would save the company money. And now I must accept all responsibility for not having a good answer for a prospective employer (who is looking for LICENSED professionals) as to why I haven't yet become licensed a full four years after graduating when licensing requirements only takes two years to complete (normally). Yes, it is all my own fault. I should NEVER have tried to better myself. I should have known my place and stayed there. How DARE ME!?

[Educated Idiot]

kinnath said "I'm still waiting for the genius to arrive on earth that figures out how to end human suffering without destroying the incentive for people to take care of themselves."

Well, so am I!
I am a 56 year old female who was working in the fields by age 5 to help put food on the family table. At age 45, I was self sufficient with NO DEBT WHATSOEVER, (credit cards were ONLY used for necessities such as prescriptions, and paid off by the end of the month; I paid cash for all of my cars) but the cost of living kept going up and my wages for "unskilled" labor were not, so at the advice of a "career counselor," I took out my first loan at age 45 to attend college. I DID the research (I was not STUPID--I was only UNeducated), and at the time I took my first loan, in the early 1990's the protections were in place. I NEVER received information about the protections being lifted later in the 90's, and was NOT TOLD when I went back to borrow the last amount I needed to complete my degree (a 15 year process while I worked my ass off trying to complete it, all the while dealing with an illness) that the rules had been changed! When I discovered that my loan amount had more than tripled by fees and penalties for things I had not been made aware of, the Financial Aid Officer refused to see me! I now know that the university was taking kickbacks from the lenders for signing students up. I went to the very people who were supposed to keep me informed, but THE INFORMATION WAS KEPT FROM ME. I work TWO jobs, and still cannot afford to pay the $800 a month that both Nelnet and Citibank demand. So, even though I am paying over a $1000 a month, the loan amount INCREASES!
If kinnath REALLY wants to know who is responsible for this debacle, he/she needs to get an education.Unfortunately, it's already at my (and others') expense.
I had the "incentive" to take care of myself since age 5, at least. It's those who want to blame ME for the greedy actions of those in power who have taken away that incentive. I am angrier at people like kinnath who refuse to look at reality than the ones who took advantage of me!
Come on kinnath! How about taking responsibility for having opened your mouth before you got all of the information! You want to know who is "destroying the incentive for people to take care of themselves?" Look in the mirror!

[jazz]

YEAH, WHERE THE EFFE is OUR bailout? Its not OUR fault, YOU FORCE US TO make these RIDICULOUS loans, which only a lawyer can NOT agree to, and when we cant pay EVEN if WE NOTIFY YOU, YOU STILL try and ILLEGALLY DEFAULT?? Yall are WORSE THAN A RECURRING ID THIEF. THE PROBLEM IS WE CANT FORCE OUR SSNs from you.

[Jimmy]

Not sure our President Obama is the problem, He's a guy trying to help. He's certainly not perfect, but it's better than everyone needing short term loans all the time.

The economy is recovering, since this post we've seen the bottom and are coming out.
Let's keep our heads up.

[James Larsen]

Not sure that many student loans are ever better than the short term loans that payday companies offer. They need more education and awareness around them. I'd love the credit card act to apply to any student loans also.

We need to provide financial literacy to the young men and women who are taking student loans and then finding the pain of paying back a loan of that size and scope.

[Jim bayer]

Not sure that many student loans are ever better than the short term loans that payday companies offer. They need more education and awareness around them. I'd love the credit card act to apply to any student loans also.

We need to provide financial literacy to the young men and women who are taking student loans and then finding the pain of paying back a loan of that size and scope.

[herbalife indonesia]

We need to provide financial literacy to the young men and women who are taking student loans and then finding the pain of paying back a loan of that size and scope.