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The student loan debt perfect storm
POLITICO ^ | 06/28/2013 | ROGER W. FERGUSON JR. and DEBRA W. STEWART

Posted on 06/28/2013 8:20:21 AM PDT by SeekAndFind

With Congress and the Obama administration focused on Monday’s deadline to prevent student loan interest rates from doubling, it is an apt time to examine the larger consequences of America’s staggering student loan debt load. Even as mortgage, credit card and other consumer debt levels have decreased, today’s students carry unprecedented — and growing — debt burdens. With outstanding student loan debt in the first quarter of 2013 totaling a record $986 billion, the impact on individuals is disturbing. But add to that the fact that this debt load threatens the nation’s very ability to compete in the global economy, and you have the makings of a national crisis.

It is easy for those of us who are well beyond our college years to dismiss student loan debt as merely a rite of passage that we, too, endured. But today’s students are in a much more difficult financial position than any previous generation. Families are facing stagnant pay; public funding for student support has declined; and the real costs associated with higher education continue to rise. Combined with a still challenging post-graduation job market, the situation is truly a perfect storm, and one we cannot continue to ignore.

Sadly, many students are making uninformed decisions with lasting impact. While loans are an important ingredient in a student’s overall investment in higher education, it is of great concern that two out of five student loan borrowers fall behind on payments within the first five years of entering the repayment phase.

While there are no quick fixes for the student debt crisis, three sectors — education, government and business — must all step up to help solve this looming problem.

(Excerpt) Read more at politico.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: debt; studentloancrisis; studentloans; tuition

1 posted on 06/28/2013 8:20:21 AM PDT by SeekAndFind
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To: SeekAndFind
The first thing democrats do when they get into power is sock it to voters and groups that support republicans, the wealthy, the military, the oil industry etc.

The vast majority of college kids voted for Obama, I say sock it to them, turnabout is fair play.

2 posted on 06/28/2013 8:24:35 AM PDT by apillar
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To: SeekAndFind

I predict a few things will happen:

1. Bankruptcy laws currently make it very difficult to discharge student loan debt. I predict that these laws will be changed, so that students can get these loans discharged in bankruptcy.

2. There will be additional programs to have debts forgiven if students do certain work, such as teaching in inner city schools, rural schools, or working in fields such as public health or social work.

3. There will be new laws so that loan repayments will be tied to income. Instead of having to pay $XX amount per month, a sliding scale will be in place, so that students who go into fields which don’t pay well will see their monthly payments adjusted downwards.

4. Interest rates on these loans will be permanently reduced at some point to a low level, say 3%, rather than being allowed to change based on interest rates in the financial markets.

5. Obama and Democrats will try to force through changes such as these in some comprehensive bill, thousands of pages long, which nobody will have time to read. And it will be said to be some emergency which has to be done right now. Nancy Pelosi will helpfully say we have to pass the bill to find out what’s in it.


3 posted on 06/28/2013 8:27:07 AM PDT by Dilbert San Diego
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To: SeekAndFind
I am sorry about this and I have said before, it's hard for me to sympathize with this.

In college, I worked to get through from one year to the next.

I knew I was not entitled to have a 4 year campus party at the expense of my parents or others.

I knew I had to work if I was going to get an education at all. It was NOT a party at any time in the process.

My parents helped a lot and with the condition that if my grades fell below B- I was entirely on my own.

Still I worked to get through. I didn't live on campus, but stayed at my parents house (NOT cool enough for THESE kids, I guess). And when I WAS enrolled, I still worked simultaneously. Some of the time, I had to skip semesters, until I could get enough money to return./p>

As I said, it took longer than 4 years and it was uphill all the way.

But when I graduated, I owed NO ONE!

4 posted on 06/28/2013 8:29:03 AM PDT by SMARTY ("The test of every religious, political, or educational system is the man that it forms." H. Amiel)
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To: SMARTY

As an employer, I care about how you financed your degree.

Two candidates, pretty much the same, one financed their education on student loans, the other partially financed it by working.

Guess which one I’m going to hire?


5 posted on 06/28/2013 8:30:28 AM PDT by dfwgator
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To: Dilbert San Diego

Let me add, that your list implies that no private entity will EVER consider granting student loans under these unfavorable conditions. That means that college education will increasingly be financed by and manipulated by the Federal Government. Look for near indentured servitude to the government for loan repayment to be increasingly common in the future.


6 posted on 06/28/2013 8:35:19 AM PDT by Pearls Before Swine
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To: SMARTY

Well, you’re just not with it. (sarcasm)

These college kids today feel entitled to live on campus. They want to party all the time. They expect to live in a dorm which resembles a nice hotel, complete with gyms and other amenities which colleges have now.

And the guys expect to have all this, plus have a girl waiting in his room. Party on! Who has time to study?

Work your way through college??? What an archaic concept. (more sarcasm)

College students are going to be next oppressed victimized group, due to having student loan debt, and not being able to get jobs with adequate income to pay these debts. It will be someone else’s fault. Probably the blame will go to Mitt Romney and Corporate America, for not giving these college kids good paying jobs after graduation.

No blame will go to Obama and good Democrats for their policies which have caused economic growth and job growth to stall out. There will be no discussion of how economic growth and job growth and constricting governmental policies are interconnected. Instead, blame will be cast on the Romneys of the world for not giving these college kids jobs.


7 posted on 06/28/2013 8:37:00 AM PDT by Dilbert San Diego
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To: SeekAndFind

Politico must have laid off a good portion of the I.Q’s as it now takes a minimum of two writers to complete an article.


8 posted on 06/28/2013 8:37:21 AM PDT by Vendome (Don't take life so seriously, you won't live through it anyway)
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To: Dilbert San Diego

3 already exists. It doesn’t matter what your job is just what your income is. IIRC there are numerous levels you can apply for depending on your income.


9 posted on 06/28/2013 8:41:16 AM PDT by aft_lizard
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To: Dilbert San Diego

“There’s a time and a place for everything, and it’s called ‘college’” - Chef (South Park)


10 posted on 06/28/2013 8:43:11 AM PDT by dfwgator
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To: SeekAndFind

All that “College Money” is sure keeping a lot of Obama’s professors on the payroll, indoctrinating future useful idiots and swelling the rolls of the terminally ignorant. What a country!


11 posted on 06/28/2013 8:44:57 AM PDT by Don Corleone ("Oil the gun..eat the cannoli. Take it to the Mattress.")
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To: Dilbert San Diego
College kids are on the period of prolonged incubation that their parents were as young people.

Americans in general are completely SPOILED and have forgotten (if they ever knew) what ‘sacrifice’ and ‘effort’ mean.

The idea of waiting until you can afford a thing BEFORE you get it, is an alien concept!

I work with people like this who would NOT forgo a vacation no matter how problematic their income is. Everything will go on a charge card, rather than skip ONE vacation.

These people are completely enslaved to the idea of taking their kids to Disneyland, buying the latest gadgets, toys, clothes, cars... everything is NEW and up to date at all costs and even IF it has to be charged.

To deny oneself anything is unthinkable. No one even considers saving or waiting until it's affordable much less, just telling the kid NO not this year. Parents are doing this and are only capable of this mentality because they were themselves SPOILED and indulged beyond all reason. These are second and third generation Americans with NO concept of thrift or self discipline.

12 posted on 06/28/2013 8:45:44 AM PDT by SMARTY ("The test of every religious, political, or educational system is the man that it forms." H. Amiel)
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To: SeekAndFind

Eliminate the H-1B program and have employers hire American graduates would help.

Don’t offer the reduced rate in-state tuitions to illegal aliens, and use their full freight tuition to offset the increased education costs.

Or, if you insist on having an H1-B program, replace all the expensive American perffessers with cheap Chinese and Indian ones.

(I note that “American” companies are eager to hire fresh unexpereinced IIT graduates while turning up their noses at American MIT graduates. Maybe MIT, Berkeley, Cornell, etc. should replace their under-performing professors with the clearly more skilled educators from IIT, etc.)


13 posted on 06/28/2013 8:58:01 AM PDT by null and void (Republicans create the tools of oppression, and the democrats gleefully use them!)
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To: Dilbert San Diego

Or we could tie professor’s income/retirement to the salaries their graduates earn.

If you can’t teach the kids a useful skill, your retirement package is going to look mighty thin...


14 posted on 06/28/2013 9:00:26 AM PDT by null and void (Republicans create the tools of oppression, and the democrats gleefully use them!)
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To: Pearls Before Swine
Look for near indentured servitude to the government for loan repayment to be increasingly common in the future.

Look for FedGov to morph that increasing servitude into defacto slavery.

15 posted on 06/28/2013 9:06:40 AM PDT by Max in Utah (A nation can survive its fools, and even the ambitious. But it cannot survive treason from within.)
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To: SMARTY
As I said, it took longer than 4 years and it was uphill all the way.
Bravo for sticking it out. Took me almost 10 years and that includes full time and part time work, the GI Bill, and a working wife.
Two sons popped up along the way too. It was a very busy decade.
16 posted on 06/28/2013 9:11:46 AM PDT by oh8eleven (RVN '67-'68)
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To: Dilbert San Diego
1. Bankruptcy laws currently make it very difficult to discharge student loan debt. I predict that these laws will be changed, so that students can get these loans discharged in bankruptcy.

The undue hardship standard in place at present is very difficult to meet. I think it will be a revision in the code, along with some nudges from places like the 9th Circuit, that softens this rule.

2. There will be additional programs to have debts forgiven if students do certain work, such as teaching in inner city schools, rural schools, or working in fields such as public health or social work.

The Obama administration has implemented a program which allows a student to pay for 20 years, some portion of their disposable income (however that is calculated), and then have the remaining balance forgiven. You would think that 20 years would cover payback of most borrowing. But the examples I have seen (assume, for instance, Brown undergrad, Yale or NYU law or medical school, etc.) show that even after 20 years, the amount forgiven can be significant. Remember, because the vast majority of student loans are federally guaranteed this is a zero sum game between the borrowing student and the taxpayer in general. The less the student pays, the more the taxpayer pays, and vice versa.

3. There will be new laws so that loan repayments will be tied to income. Instead of having to pay $XX amount per month, a sliding scale will be in place, so that students who go into fields which don’t pay well will see their monthly payments adjusted downwards.

Yup.

4. Interest rates on these loans will be permanently reduced at some point to a low level, say 3%, rather than being allowed to change based on interest rates in the financial markets.

Yup. Fixing it at one number in the mindset of the public means less recognition that the cost of funds actually fluctuates, and that fixing the rate means subsidies to some and surcharges to others. Why shouldn't the rate reflect the alternative use of those funds at the time they were borrowed by the student?

5. Obama and Democrats will try to force through changes such as these in some comprehensive bill, thousands of pages long, which nobody will have time to read. And it will be said to be some emergency which has to be done right now. Nancy Pelosi will helpfully say we have to pass the bill to find out what’s in it.

You got it.

17 posted on 06/28/2013 9:13:35 AM PDT by Wally_Kalbacken
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To: oh8eleven

I kind of puts you behind the 8 ball in that you are not the ‘kid’ that people want when you go job hunting.

I would sit in those interviews and talk to young kids in the HR office and they were very snotty...

Especially, if they didn’t have a degree themselves.


18 posted on 06/28/2013 9:17:15 AM PDT by SMARTY ("The test of every religious, political, or educational system is the man that it forms." H. Amiel)
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To: SMARTY
I kind of puts you behind the 8 ball in that you are not the ‘kid’ that people want when you go job hunting.
I'm also a former Marine and VN vet.
While it was never shoved back into my face, I'm sure there were interviewers who stopped reading my resume right there.
19 posted on 06/28/2013 9:30:19 AM PDT by oh8eleven (RVN '67-'68)
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To: oh8eleven

Bank on it.

There is a lot of discrimination LIKE THAT in hiring.


20 posted on 06/28/2013 9:37:21 AM PDT by SMARTY ("The test of every religious, political, or educational system is the man that it forms." H. Amiel)
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To: SMARTY
Most people don't know that discrimination against the VN vet was so bad, congress had to pass a law designating us as minorities.
Vietnam Era Veterans' Readjustment Assistance Act of 1974.
21 posted on 06/28/2013 9:46:30 AM PDT by oh8eleven (RVN '67-'68)
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To: SMARTY

Hello, my daughter went to a state university. She got excellent marks despite facing a health problem and a personal situation which was so dreadful that I will not describe it here. It took raw guts and determination for her to get through. She had academic scholarships and she worked like a dog, often doing a brutally hard physical job in bitter weather. She was not spending her time drinking and partying, as her employers can assure you. I might add, she is a die-hard broken-glass conservative.

We found that it is not possible for someone who is working for $7.50 an hour to make enough to live on AND pay the tuition, fees, and books of a low-priced state college or university. My daughter did have to take out loans.

And once you start taking loans, you can’t stop. That is, you have to continue in school and get the degree, because if you drop out for any length of time the loans come due, yet without that degree you can’t get a job good enough to pay the loans back. It’s a vicious circle and it’s one many young people get into because they have no familiarity with credit, and they are sweet-talked or pressured by the university administration.

My daughter is now confronted with the need to pay her loans back. She is having a nightmarish time, working long hard hours yet still not making enough money to live decently, and now she has to come up with several hundred bucks a month in addition. She has a job—a bit of a miracle in this economy for young people—and is doing well in what may someday be a great career. But it seems she won’t be able to afford even the modest room she lives in. She has nowhere to go. It’s worrisome.

Yes, I know you have no sympathy for her and the other kids like her. You and I were able to live at home and graduate without debt because things were cheaper back then. But it’s different now. Even state schools are expensive, and sometimes, as in my state, they are extremely difficult to get into.

I don’t know what the solution is. I’m deeply glad she went to university and learned what she did, for it changed the orientation of her life for the better, toward higher things and better people. But when you see that your child is faced with homelessness despite having a job, it’s distressing indeed.


22 posted on 06/28/2013 10:14:25 AM PDT by ottbmare (The OTTB Mare--now a Marine Mom)
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To: SeekAndFind
College was relatively affordable before the Feds got heavily involved.

The college interest rate was once 3% - it is now 6 to 9%.

23 posted on 06/28/2013 10:30:55 AM PDT by Slyfox (Without the Right to Life, all other rights are meaningless.)
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To: null and void
"Eliminate the H-1B program and have employers hire American graduates would help."

You're right. They need jobs to repay loans. And with 23% unemployment (shadowstats.com) it's a wonder these loans aren't blowing up more than they are.

Restore import tariffs too and put Americans back to work.

24 posted on 06/28/2013 10:32:03 AM PDT by DannyTN
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To: Dilbert San Diego

“We cannot continue to rely on our military in order to achieve the national security objectives that we’ve set. We’ve got to have a civilian national security force that’s just as powerful, just as strong, just as well-funded.” (emphasis added)

President Obama Colorado Springs, CO July 2, 2008


25 posted on 06/28/2013 10:33:53 AM PDT by listenhillary (Courts, law enforcement, roads and national defense should be the extent of government)
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To: ottbmare
I went back to college as an adult.

My first time around at a state university my tuition was $42.00 per credit hour, and with books it cost me about $1,000 per semester.

My latest venture I went to a great liberal arts university and got my degree in history. I got a half-tuition scholarship but I still ended up in debt at about $50,000.

Gone are the days when you can get a decent college education and graduate without any debt.

26 posted on 06/28/2013 10:38:58 AM PDT by Slyfox (Without the Right to Life, all other rights are meaningless.)
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To: Dilbert San Diego

Absolutely! They also feel entitled to go out of state... meaning that at the low end tuition,books, fees, room and board will run them $30,000 plus per year, with many students paying fees closer to $40,000. Those are the costs for State Universities! The schools are raising fees every year, and because they know loans are so readily available advertise their schools and promote freshman weeks featuring pop stars.

I have a 19 year old with friends who are attending Universities up and down the east coast.
These are regular middle class kids, who’s parents earn too much for federal aid, yet cannot pay the entire cost out of pocket.

Sadly, most of them are not majoring in subjects that will lead to lucrative careers.


27 posted on 06/28/2013 7:20:53 PM PDT by Katya (Homo Nosce Te Ipsum)
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