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    #189196 - 04/23/14 02:29 PM Re: Free tuition at US public Universities? [Re: Val]
    Old Dad Offline
    Member

    Registered: 07/30/12
    Posts: 423
    Yes, banks are businesses who's purpose it is to make money. The Federal Government isn't even concerned about a balanced budget so they can offer whatever rate they wish to appease the voters. Not likely to be competitive no.

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    #189197 - 04/23/14 02:40 PM Re: Free tuition at US public Universities? [Re: madeinuk]
    Dude Offline
    Member

    Registered: 10/04/11
    Posts: 2856
    I'm not sure where you missed the part where student loans are not dischargeable debt. http://www.finaid.org/questions/bankruptcyexception.phtml

    Quote:
    The Bankruptcy Amendments and Federal Judgeship Act of 1984 made private student loans from all nonprofit lenders excepted from discharge, not just colleges, by striking the words "of higher education". The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 expanded this to include all "qualified education loans", regardless of whether a nonprofit institution was involved in making the loans.


    The only reason the banks HAVE TO charge a higher rate than the government is because they have to borrow their money from the Fed, though these days they're doing so at zero percent, so until the Fed hikes that, there are no real need... except that a government program is usually designed to make zero dollars in profit, and that's contrary to the mission of a bank. So they don't have to charge more, but they're going to, because that's who they are. If there's no profit in it, they're not interested.

    The banks are VERY interested because it's a huge profit pool, which they can pretend is without risk, much like they pretended with housing, due to the whole non-dischargeable thing.

    Based on the fact that they repeated the S&L crisis less than 20 years later and exponentially bigger in scale, I can't say I'm in any way impressed by the intelligence of banks.

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    #189201 - 04/23/14 03:00 PM Re: Free tuition at US public Universities? [Re: Val]
    HowlerKarma Offline
    Member

    Registered: 02/05/11
    Posts: 5181
    Originally Posted By: Val
    Originally Posted By: Old Dad
    ....so yeah, the competition is quite uneven and the rates charged aren't going to be competitive.


    Back in the olden days of the 80s when I was a student, the entire point of rates on student loans was that they were low. Back then, interest rates were stratospheric (15%+), and student loan rates were 8%. This is one of those facts that people (err, especially banks) seem to have conveniently forgotten as the loans have become big business.



    YES.

    + non-dischargeable debt. Which of course explains why people (or banks) are so eager to forget this point, since after all, forgetting is the only way to make more money NOW-NOW-NOW. Who cares about ten years from now, anyway? Housing, surely, will have recovered since then and we can all go back to making lending decisions irresponsibly THERE.

    smirk
    _________________________
    Schrödinger's cat walks into a bar. And doesn't.

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    #189203 - 04/23/14 03:07 PM Re: Free tuition at US public Universities? [Re: madeinuk]
    Old Dad Offline
    Member

    Registered: 07/30/12
    Posts: 423
    Much easier for the Fed. to collect on unsecured debt than a bank.
    In any case, my links are meant to show that government subsidies do as much harm as good. I'm not completely against them by any means, I'm just throwing it out there that government funded college is far from the end all for an answer to high cost of college, in fact, it's contributed to it.

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    #189206 - 04/23/14 03:15 PM Re: Free tuition at US public Universities? [Re: madeinuk]
    HowlerKarma Offline
    Member

    Registered: 02/05/11
    Posts: 5181
    Perhaps-- it's just unclear what a better solution looks like.

    The market forces definitely have not helped this particular problem, historically speaking.
    _________________________
    Schrödinger's cat walks into a bar. And doesn't.

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    #189250 - 04/24/14 06:51 AM Re: Free tuition at US public Universities? [Re: Dude]
    Bostonian Offline
    Member

    Registered: 02/14/10
    Posts: 2600
    Loc: MA
    Originally Posted By: Dude
    I'm not sure where you missed the part where student loans are not dischargeable debt. http://www.finaid.org/questions/bankruptcyexception.phtml

    But they are "forgiveable". Banks cannot compete with a lender that will forgive debt for political reasons. The overall cost of this loan forgiveness concerns me, and I am further irked by the special treatment of people working for the government and for non-profits (forgiveness after 10 years of payments, vs. 20 years for other people), as if the former group were more noble.

    http://online.wsj.com/news/articles/SB10001424052702303887804579503894256072308
    Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Costs, Higher Tuition
    By JOSH MITCHELL CONNECT
    Wall Street Journal
    April 22, 2014 5:56 p.m. ET

    Quote:
    Government officials are trying to rein in increasingly popular federal programs that forgive some student debt, amid rising concerns over the plans' costs and the possibility they could encourage colleges to push tuition even higher.

    Enrollment in the plans—which allow students to rack up big debts and then forgive the unpaid balance after a set period—has surged nearly 40% in just six months, to include at least 1.3 million Americans owing around $72 billion, U.S. Education Department records show.

    The popularity of the programs comes as top law schools are now advertising their own plans that offer to cover a graduate's federal loan repayments until outstanding debt is forgiven. The school aid opens the way for free or greatly subsidized degrees at taxpayer expense.

    At issue are two federal loan repayment plans created by Congress, originally to help students with big debt loads and to promote work in lower-paying jobs outside the private sector.

    The fastest-growing plan, revamped by President Barack Obama in 2011, requires borrowers to pay 10% a year of their discretionary income—annual income above 150% of the poverty level—in monthly installments. Under the plan, the unpaid balances for those working in the public sector or for nonprofits are then forgiven after 10 years.

    Private-sector workers also see their debts wiped clean—after a longer period of 20 years—reflecting a government aim to have no one, wherever they work, paying down student debt their entire working life.


    An independent study estimates the future cost of the 2011 program, known as Pay As You Earn, could hit $14 billion a year.

    The Obama administration has proposed in its latest budget released last month to cap debt eligible for forgiveness at $57,500 per student. There is currently no limit on such debt.


    http://www.nationalreview.com/phi-beta-c...ing-george-leef
    “Pay As You Earn” -- A Ploy to Keep the College Bubble Going
    By George Leef
    National Review
    April 24, 2014 9:00 AM

    Quote:
    Today’s Wall Street Journal has a good editorial on the Obama administration’s “Pay As You Earn” program, which is designed to help college students (and also those seeking higher degrees, such as JDs) by allowing many of them to off-load some of their debts. This will probably buy some votes and undoubtedly help to keep the higher ed bubble inflated for a while longer. Especially disturbing is the way the program lures students into “public service” work so they can escape more of their debt. The editorial correctly notes, “impressionable youngsters, who likely have little or no wealth, are being given an enormous financial incentive to pursue careers in government or low-paying nonprofits.”

    This is yet another good reason why we should never have gotten into federal student aid in the first place.


    The WSJ Editorial is "Telling Students to Earn Less" http://online.wsj.com/news/articles/SB10001424052702304279904579517934206301354 .


    Edited by Bostonian (04/24/14 07:26 AM)
    Edit Reason: added title of WSJ editorial

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    #189253 - 04/24/14 06:58 AM Re: Free tuition at US public Universities? [Re: madeinuk]
    Dude Offline
    Member

    Registered: 10/04/11
    Posts: 2856
    It's a college education. Of course parents and kids are going to spend more. THINK OF THEIR FUTURES!! You don't want to be digging ditches or serving fries, do you?

    Plus, loan repayments are, like, soooo far off, man. Live in the now.

    Oh, and a really good sales pitch can make $45k for cooking school seem like a wise investment:
    http://news.yahoo.com/culinary-school-grads-claim-were-ripped-off-203350240.html

    As I've said before, this is an area where people are not equipped to be rational. So why would they refuse to pay higher sticker prices at 15% interest than they'll pay at 4%?

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    #189257 - 04/24/14 07:43 AM Re: Free tuition at US public Universities? [Re: madeinuk]
    Sweetie Offline
    Member

    Registered: 06/05/11
    Posts: 669
    I got a grant for grad school that was here is the money, teach in a critical needs area after graduation (mine was special ed but it was also math and science back then) and you taught and every year you taught it forgave part of the money...teach in an inner city/title I school and the debt was forgiven even faster. I used my grad school money (that I had saved) for a house down payment instead.


    Edited by Sweetie (04/24/14 07:43 AM)
    _________________________
    ...reading is pleasure, not just something teachers make you do in school.~B. Cleary

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    #189264 - 04/24/14 08:12 AM Re: Free tuition at US public Universities? [Re: HowlerKarma]
    Bostonian Offline
    Member

    Registered: 02/14/10
    Posts: 2600
    Loc: MA
    Originally Posted By: HowlerKarma
    Perhaps-- it's just unclear what a better solution looks like.

    The market forces definitely have not helped this particular problem, historically speaking.

    Private lenders should be able to set interest rates that reflect credit risk and depend on the school attended, high school grades and test scores, college major, and college grades (for continuing students). Some politicians oppose that, citing disparate impact:

    http://www.insidehighered.com/news/2007/07/05/loans#sthash.Oumfgm4U.3NkhNvYh.dpbs
    'Redlining' or Reasonable Criterion?
    Inside Higher Education
    July 5, 2007
    By Andy Guess
    Quote:
    Like most of the revelations and allegations that have poured out of Andrew M. Cuomo's office in the New York attorney general's investigation into the student loan industry, his latest is provocative and highly charged. Two weeks ago, in a powerfully worded letter to Sen. Christopher Dodd (D-Conn.) and Rep. George Miller (D-Calif.), Cuomo accused some providers of private student loans with engaging in the kind of racial discrimination that home mortgage lenders once practiced.

    Some private lenders, he contended, have been using judgments based on the college a student attends -- in addition to typical criteria such as the credit ratings of borrowers and their parents -- as one factor in the evaluation that ultimately affects the interest rate on a loan. The practice, he wrote, is "analogous to 'redlining' in the home mortgage industry," a reference to charging higher rates based on a prospective homeowner's neighborhood, common a generation ago before federal laws changed to prohibit it.

    Taking a specific college, or type of college, into account as a factor in determining a credit score could theoretically mean that loans to students at, say, Harvard could be seen by lenders as less risky and therefore more desirable than those made to students at community colleges, for-profit institutions and historically black colleges. John Dean, special counsel to the Consumer Bankers Association, said, for example, that "some underwriting criteria include future earnings prospects that may be reflected in the type of institution." That's where the allegations of discrimination have come in, because critics of the practice say there is a disparate impact that places disproportionately poor and minority students at a disadvantage when applying for loans.

    Representatives of the private loan industry bristle at the contention that they are engaging in a present-day form of discrimination, but they maintain that the practice, for some lenders at least, can be useful as a way to make student loans available to borrowers who otherwise wouldn't have access to them at all.

    Some on Capitol Hill, though, see things differently and are taking steps to ban extra factors such as a student's institution in calculating credit risk.

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    #189265 - 04/24/14 08:13 AM Re: Free tuition at US public Universities? [Re: Bostonian]
    Dude Offline
    Member

    Registered: 10/04/11
    Posts: 2856
    Originally Posted By: Bostonian
    Originally Posted By: Dude
    I'm not sure where you missed the part where student loans are not dischargeable debt. http://www.finaid.org/questions/bankruptcyexception.phtml

    But they are "forgiveable". Banks cannot compete with a lender that will forgive debt for political reasons. The overall cost of this loan forgiveness concerns me, and I am further irked by the special treatment of people working for the government and for non-profits (forgiveness after 10 years of payments, vs. 20 years for other people), as if the former group were more noble.


    Indentured servitude was only for 7 years, so we seem to be going in the wrong direction.

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