Post: #1

Student-Loan Debt: A Federal Toxic Asset
Only about 56% of borrowers are making payments. At the peak of the mortgage crisis, 10% fell behind on payments.

Quote:Let's call her Alice. One of us has known her for years. She earned her Ph.D. in the mid-1990s when academic jobs were scarce, and she wound up an academic gypsy. She left graduate school to take a one-year full-time academic appointment, but then found herself cobbling together part-time teaching jobs at different community colleges in a large metropolitan area, earning a couple of thousand dollars for each course she teaches. She is a dedicated teacher, but her annual income is between $30,000 and $40,000.

Alice owes $270,000 in student loans. She only borrowed about $70,000 to pay for grad school, but she's never been able to afford much in the way of payments, and after consolidating her loans and accumulating interest charges for years, she's watched her debt roughly quadruple.

If Alice taught students in a low-income high school or was a recent graduate, she would be eligible for various programs that would allow her to discharge at least some of her debt. But since she graduated at a time before income-based repayment and loan-forgiveness programs, there is no federal program to help established part-time community-college faculty discharge their old student-loan debts.

In fact, the federal government is quite content with Alice's situation. The $270,000 she owes is carried on the government's books as an asset. The government reasons that, since it is nearly impossible to discharge student loans through bankruptcy, it will eventually collect all of the more than $1 trillion in federal student loan debt that Alice—and millions of other student borrowers—owe.

Not likely. Because Alice has figured out how to avoid repaying and still stay in the government's good graces. She is able to defer her loans without accruing additional interest by enrolling in two community-college courses per term while she works toward a business degree that she hopes will lead to a new career. Meanwhile, her $270,000 balance remains on the books, growing all the time.

She doesn't think of herself as a deadbeat, but making a $1,200 monthly payment for the next 30 years is daunting. Within a few years, she'll be of an age to collect Social Security, and at that point she expects the government to begin withholding about $30 from each monthly check to pay her student loans. That will hardly offset the hundreds of dollars of interest charges that accrue each month. Meanwhile, Alice has friends with full-time jobs who are appalled by her taking courses to avoid repayment, but she says she has to choose between paying for a place to live and repaying her loans.

But it is Alice's place in the larger picture that is the more important story. The federal government assumes that almost all student-loan debt can be treated as an asset because federal loans are not dischargeable under normal circumstances. So it really is not a problem if the total debt exceeds $1 trillion ($2 trillion around 2020 on current trend), since all that money is sure to be repaid.

But that assumption looks more and more fanciful. Studies by the New York Federal Reserve Bank show that only about 56% of borrowers are making payments. Among those under 30 and in repayment—that is, they have not received permission to postpone payments—more than a third are delinquent. That's a lot: At the peak of the recent housing crisis, only about 10% of borrowers fell behind on their mortgage payments. But Alice is part of the 44% of borrowers who are not repaying student loans for various reasons.

Why isn't this high percentage of borrowers who are excused from making payments alarming federal policy makers and most of the analysts who study student loans? There is really no prospect that Alice is going to be able to cough up more than a quarter-million dollars and pay off what she owes. At some point, the government is going to have to reclassify billions in loans and interest as losses. Meanwhile, as college costs rise and more students pursue higher education, student borrowing grows. According to the Department of Education, students borrow over $100 billion annually, and the figure rises with each new academic year.

This is a big problem. Unexpected write-offs of billions of unpaid student loans will confront Americans with a set of ugly choices: Will we raise taxes to cover the losses—which is impossible to imagine in today's political climate? Do we cut other federal spending—which is nearly as unlikely since we're talking about substantial sums? Or do we significantly increase the national debt. This will be a continuing crisis; each year's increased borrowing will require confronting the same choices in future years.

Washington recently acknowledged that there are a lot of Alices; in mid-September, the GAO issued a report documenting the rapid increase in the student debt among those over 65. But many of the proposed reforms, on tinkering with interest rates and the like, would increase—not reduce—total student-loan debt. A larger issue, so far ignored, is that unless college costs are brought under control, things will only get worse, and the federal government will continue to accumulate Alice-like "assets" in the federal direct-loan portfolio.

Post: #2

The student loan crisis is really just a microcosm for the United States itself, which has nearly 18 trillion in debt.

Any rational man can see the US will never pay off the 18 trillion. Just like any rational man knows Alice cannot pay back 270K. Regardless, it doesn't matter because everyone acts like there's nothing wrong. One can look through history and find hundreds of examples of political problems that were ignored until everything explodes into war or extreme poverty, and it won't be any different this time.

Post: #3

Why waste so much going to college when one can just fall back on online learning? Many websites offer free courses in all subjects. Save some money.

Post: #4

Oh boy, school loans discussion. This has been thrashed about in this thread.

/thread-34253.html

I am sorry but if you don't want to be responsible for the debt, don't go to school. Yes, I know the article is about the bigger problem of this underperforming/non performing debt and its potential impact on our economy. Maybe highschools need to teach a personal finance class. But I'm sorry, if you can't figure out what you will do with your non -STEM degree maybe you shouldn't do it. But too many kids think of college as a 4 year party.

Post: #5

Paid 2 loans off, still got around 15,000 to go, lovely.

I definitely have buyers remorse.

Post: #6

Assuming you're invited to a graduate school, you should not be taking on any student loans.

Alice's graduate school experience: $70k in debt
My graduate school experience: Paid off all undergraduate student loans with stipend, with leftover for living expenses+vehicle.

The lesson: Don't go to graduate school unless you get paid for it. It's a sucker's game.

Post: #7

(10-02-2014 04:24 PM)Texas_Tryhard Wrote:  Assuming you're invited to a graduate school, you should not be taking on any student loans.

Alice's graduate school experience: $70k in debt
My graduate school experience: Paid off all undergraduate student loans with stipend, with leftover for living expenses+vehicle.

The lesson: Don't go to graduate school unless you get paid for it. It's a sucker's game.

Good point, if it is paid for - it means you may have some talent/potential. You paying for it (unless it is Law school, MBA and even then you need to go Top 10), means maybe you are just trying avoid the real world.

Post: #8

(10-02-2014 04:24 PM)Texas_Tryhard Wrote:  Assuming you're invited to a graduate school, you should not be taking on any student loans.

Alice's graduate school experience: $70k in debt
My graduate school experience: Paid off all undergraduate student loans with stipend, with leftover for living expenses+vehicle.

The lesson: Don't go to graduate school unless you get paid for it. It's a sucker's game.

Golden.

I'd even apply this to undergrad in the form of your 1st year salary after graduating should be guaranteed to cover your entire tuition unless covered by scholarships or grants.

Post: #9

Quote:She doesn't think of herself as a deadbeat, but making a $1,200 monthly payment for the next 30 years is daunting. Within a few years, she'll be of an age to collect Social Security, and at that point she expects the government to begin withholding about $30 from each monthly check to pay her student loans. That will hardly offset the hundreds of dollars of interest charges that accrue each month. Meanwhile, Alice has friends with full-time jobs who are appalled by her taking courses to avoid repayment, but she says she has to choose between paying for a place to live and repaying her loans.

She doesn't think of herself as a deadbeat... but she's a deadbeat doing the sort of scammy stuff deadbeats do to get out of paying their debts. If a man owed child support but found a loophole that could get him by until he only had to be $30/month he'd be vilified by society. Except a man who doesn't pay child support is only stealing from his child. Someone who doesn't pay back student loans is stealing from society.

Post: #10

The student loan bubble will be a fun one when it pops.

Almost all of mine are repaid. I'd love to see my alma mater go belly up.

Post: #11

One of the reasons why I'm looking at cheap schools

Post: #12

(10-02-2014 04:57 PM)L M McCoy Wrote:  One of the reasons why I'm looking at cheap schools

If you're in high school I'd really recommend community college for two years. I did that then a state school and ended up with about 8k in loans. Definitely a great option assuming you have decent state schools and parents you don't hate living with. If you work a little you'll have the option of traveling a little during summer breaks, which is honestly probably more fun than college.

The loan thing is such a scam, like a mortgage they want you to be in-debt for as long as possible. Debt is killer for guys like the ones on this forum. Moving abroad with $80,000+ in debt isn't really an option, unless you never plan on coming back. My liberal friends were praising Obama for lengthening the repayment schedule to 20-years, they don't get he's just giving the banks more interest money.

I can't wait for the loan bubble to cave, even if you can't default eventually the majority of grads won't pay. It's already hurting other industries through limiting this generation's ability to spend.

The whole thing is bullshit cronyism, socialized losses and privatized gains, no wonder these companies are so fucking successful.

Post: #13

(10-02-2014 03:28 PM)Old Fritz Wrote:  Why waste so much going to college when one can just fall back on online learning? Many websites offer free courses in all subjects. Save some money.

Because it's about credentialism and indoctrination, not education.

Post: #14

This shit is never getting paid back.

Just like our national debt, this shit is getting inflated away Weimar Republic style.

Post: #15

So what exactly does a student loan bubble collapse look like? Are any pension funds relying on student loans as AAA investments?

If it's anything like the mortgage bubble the current bowers will largely get let off the hook leaving those of us who actually paid off our loans or didn't take them in the first place to be the suckers. It'll probably result in the closure of a few schools, downsizing of administrative staff and closure of a few rec centers. What other fall out might there be?

Post: #16

" Debt is killer for guys like the ones on this forum. Moving abroad with $80,000+ in debt isn't really an option, unless you never plan on coming back. "

There was a major IAMA on Reddit from someone who did exactly this. Living happy as a clam overseas.

Post: #17

(10-02-2014 05:18 PM)Ensam Wrote:  So what exactly does a student loan bubble collapse look like? Are any pension funds relying on student loans as AAA investments?

If it's anything like the mortgage bubble the current bowers will largely get let off the hook leaving those of us who actually paid off our loans or didn't take them in the first place to be the suckers. It'll probably result in the closure of a few schools, downsizing of administrative staff and closure of a few rec centers. What other fall out might there be?

There will be no collapse because a majority of the student loan debt is owned and backstopped by the Govt.

So a collapse will really just means non-performing loans get added to the national debt.

Like I said: This shit ain't getting paid back. It is going to be inflated away Weimar Republic style.

Post: #18

(10-02-2014 05:20 PM)DarkTriad Wrote:  " Debt is killer for guys like the ones on this forum. Moving abroad with $80,000+ in debt isn't really an option, unless you never plan on coming back. "

There was a major IAMA on Reddit from someone who did exactly this. Living happy as a clam overseas.

As in he never plans on coming back? Do you know the title?

The guy who wrote Off the Rails in Phnom Penh discussed this concept. Apparently he knew a Swedish guys who pulled it off, he makes it sound somewhat common.

It takes a lot of commitment though. What if your parents get sick someday? Are you going to move them abroad, possibly to some 3rd-country? I'd also be nervous about the US starting to chase down these kinds of people in 15-20 years from now, assuming times keep getting tighter. Banks and politicians are in bed together, neither is interested in letting you fuck the other.

It definitely is a legitimate option, especially if you're a doctor or something, where you can make a lot of money all over the world. If you did have to return you could hide you assets in bitcoins or abroad, and just let the government garnish your wages.

(10-02-2014 05:21 PM)The Texas Prophet Wrote:  There will be no collapse because a majority of the student loan debt is owned and backstopped by the Govt.

So a collapse will really just means non-performing loans get added to the national debt.

Like I said: This shit ain't getting paid back. It is going to be inflated away Weimar Republic style.

That's what I meant by "socialized losses, privatized gains". This country is fucked when it comes to debt, and shit will hit the fan someday soon.

In 30 years we might be paying socialist level taxes while getting Libertarian level benefits.

Post: #19

(10-02-2014 04:24 PM)Texas_Tryhard Wrote:  Assuming you're invited to a graduate school, you should not be taking on any student loans.

Alice's graduate school experience: $70k in debt
My graduate school experience: Paid off all undergraduate student loans with stipend, with leftover for living expenses+vehicle.

The lesson: Don't go to graduate school unless you get paid for it. It's a sucker's game.

I had to pay for mine since I was an international student in the US. This is a common sense thing – get whatever you can out of your employer and make them pay for any training you can!

A lot of big companies will do this for somebody. The person has to agree to stick around for 2-3 years after they complete the program. I know a guy whos MBA was paid for and then he got the fuck out there ASAP.

My old company paid for me to go to CPA review classes – they blew $8k paying for those and I decided not to sit for them anyway! I had to stay for a year to avoid paying those back.

They also paid for my immigration fees (US green card). The rule was that you stay for 2 years after you get the green card. I resigned after a year, and in my exit interview I was told that I owed the company $5k for immigration fees. I came prepared with my student loan letters and asked them if they can reconsider the amount I should pay back, because I also have student loan to cover. They said they’ll look into it and get back to me. I never heard from them and that was over 3 years ago!

(10-02-2014 05:15 PM)DarkTriad Wrote:  

(10-02-2014 03:28 PM)Old Fritz Wrote:  Why waste so much going to college when one can just fall back on online learning? Many websites offer free courses in all subjects. Save some money.

Because it's about credentialism and indoctrination, not education.

Plus it opens doors for you. I've got 2 jobs because I interviewed by alumni of my US college.

There’s too many kids in university, and the result is that there’s too many people out there with degrees now. Too much competition for jobs and absurd standards for bullshit jobs – e.g. if a woman wanted to be an admin now at a large sized firm she have to have a bachelor’s degree. About 20-30 years ago, all she needed was the ability to type and big tits!

I went to university in the early 90s in UK for my undergrad and it was free back then. There were no tuition fees for British students. In fact I was given a grant because my family was low income. When I first started my undergrad there used to be people who could not get into university – they couldn’t get the entry grades! A couple of years later in UK there was a deregulation in the type of instutitution that could call itself a unviesrty and the floodgates opened. There were too many kids in university and the governemnt couldn’t afford it so people had to pay…that’s how fucking student loans ended up in UK!

I did grad school in the US and I had to take a loan out for over $100K. I’ve made more than made that back since I graduated in extra salary post grad school, but I’m still paying it back! I’ve paid over half of it back and I expect to have it for another 5 years.

Student debt really fucks with your life – because of it, I can’t afford to buy a decent sized property, and I have to be very conservative with my job choices. I have to make a certain amount each month to afford to pay back the loan. I can’t go and work at a start-up because if it goes belly up, then I’m fucked. I have to make the monthly payments no matter what. Student debt never goes away – it can’t be discharged in a bankruptcy.

If I had no debt, I could get on a plane and get the fuck out of the US if I felt like it. I could be in Asia, eastern Europe or Latina America having a good time!

I’m glad I went to university and it worked out OK for since I have a decent paying job. The happiest day for me is when I make the last payment on that fucking loan!

Post: #20

So what exactly happens if I right now, decide to stop making payments on my student loans ?

Post: #21

(10-02-2014 05:20 PM)DarkTriad Wrote:  " Debt is killer for guys like the ones on this forum. Moving abroad with $80,000+ in debt isn't really an option, unless you never plan on coming back. "

There was a major IAMA on Reddit from someone who did exactly this. Living happy as a clam overseas.

Link if possible please? Thanks.

Post: #22

(10-02-2014 04:24 PM)Texas_Tryhard Wrote:  Assuming you're invited to a graduate school, you should not be taking on any student loans.

Alice's graduate school experience: $70k in debt
My graduate school experience: Paid off all undergraduate student loans with stipend, with leftover for living expenses+vehicle.

The lesson: Don't go to graduate school unless you get paid for it. It's a sucker's game.

This is also becoming common with all of the awful/awfully expensive law schools that are popping up. Taking dreamers' money (well, we'll be subsidizing the loans) and crapping them out for $10 temp jobs.

Post: #23

The thing that bothers me is the gift/forgiveness tax. Lets say 20 years down the line, they forgive the loan but take 10-20% or so as a tax. Then it is no longer a student loan but a set of taxes on "income". So that's 30k-40k worth of money you owe the IRS. And they can issue arrest warrants. Extradition. Asset forfeiture. The whole enchilada. Remember what happened *after* the Weimer Republic fell. If you were even related to someone they didn't like, you came under the heavy boot. Then there is the FATCA deal (Pelosi/Reid's baby) which complicates things further.

Post: #24

(10-02-2014 05:15 PM)DarkTriad Wrote:  

(10-02-2014 03:28 PM)Old Fritz Wrote:  Why waste so much going to college when one can just fall back on online learning? Many websites offer free courses in all subjects. Save some money.

Because it's about credentialism and indoctrination, not education.

this is an unfortunate reality. it doesnt really matter what skills you have for entry level positions (almost anything entry level can be learned in a few days or weeks), but companies need to see a "x major from y school" before they even consider you. theres not enough time to get through the sheer number of applicants any other way.

Post: #25

(10-02-2014 06:13 PM)samsamsam Wrote:  

(10-02-2014 05:20 PM)DarkTriad Wrote:  " Debt is killer for guys like the ones on this forum. Moving abroad with $80,000+ in debt isn't really an option, unless you never plan on coming back. "

There was a major IAMA on Reddit from someone who did exactly this. Living happy as a clam overseas.

Link if possible please? Thanks.

its definitely possible to do as long as you arent too behind on payments, but never coming back would be really tough.

heres the AMA
http://www.reddit.com/r/IAmA/comments/ko..._loans_by/