AuthorTopic: 🎓 Subprime Student Loans  (Read 5590 times)

Offline RE

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Re: Subprime Student Loans
« Reply #15 on: April 25, 2019, 05:05:48 PM »

Either way, people like me (that'd be the 56% of Americans who actually pay income tax) will be the one's paying the freight here.

No, you won't.  It's irredeemable debt.  It can't be paid off by ANYONE.  When the losses get recognized, it crashes the monetary system.

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Offline Eddie

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Re: Subprime Student Loans
« Reply #16 on: April 25, 2019, 05:09:44 PM »

Either way, people like me (that'd be the 56% of Americans who actually pay income tax) will be the one's paying the freight here.

No, you won't.  It's irredeemable debt.  It can't be paid off by ANYONE.  When the losses get recognized, it crashes the monetary system.

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Except that theoretical problem can be extended and pretended until well after I'm dead. I'm paying for it NOW, btw.
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Offline BuddyJ

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Re: Subprime Student Loans
« Reply #17 on: April 25, 2019, 05:10:18 PM »
A student loan is an investment in one's self. It follows the same rules as any other investment...do it wisely.

I imagine most borrowers don't think about it that way, and even if they do, they aren't objective as to the risk adjusted value of that investment.

Offline RE

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Re: Subprime Student Loans
« Reply #18 on: April 25, 2019, 05:34:44 PM »

Except that theoretical problem can be extended and pretended until well after I'm dead. I'm paying for it NOW, btw.

Unlikely it can go that long.  That is what you hope for, because it means BAU continues and you can keep gambling on crypto.

In any case, you're not paying for it now.  What you are paying for now is the Big Ass Military and payouts to private insurance companies handling the med biz, along with medicare of course as well.  But without that, you woulldn't have any clients.  Or very few anyhow.

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Offline RE

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🎓 Is student debt really a problem?
« Reply #19 on: April 26, 2019, 03:45:10 AM »
https://qz.com/1603692/is-student-debt-really-a-problem/

Is student debt really a problem?
By Allison SchragerApril 25, 2019


Student debt in the US is worth a whopping $1.5 trillion. Graduates are so burdened with debt, according to reports, that they arenít buying homes or getting married. Even grandparents are burdened by student loans, having borrowed on their grandkidsí behalf.

It is no wonder, then, that US presidential candidate Elizabeth Warren has promised to wipe out student debt for three-quarters of all borrowers, as well as make public college free to attend. Her plan to forgive loans will cost more than $600 billion, on top of the cost of free college.

In a world of limited resources, itís worth asking: is student debt really an urgent problem thatís weighing down the economy?
Why student loans are special

Student debt is special, but not because of its size. Americans have $1.3 trillion in auto loans, which is arguably a worse kind of debt than the education-related kind.

Education is an asset that appreciates over time. A degree often does not mean higher earnings right out of college, but graduatesí earnings tend to rise faster over the course of their lifetimes. If you are going to take a loan out to fund an investment, education is probably the best bet you can make. A car depreciates the second you drive it off the lot, and keeps falling in value. It could be argued that thereís an auto-loan crisis thatís nearly as big, and more dangerous.

Of course, student loans tend to be larger and more onerous than car loans. But the largest loans are usually held by people who went to graduate school, who tend to be higher earners. There is, in fact, a negative correlation between the size of a loan and the odds of default. The average loan balance of someone in default is $15,000, compared with an average balance of $26,000 for the typical borrower in good standing. This is because people with bigger loan balances have more education and are often paid more; they can afford to keep up with their payments.

Low earnings is why young people donít own homes, not debt itself. Home ownership has not declined among Americans with a college education, but it has for people without a degree. This suggests student debt is not the most pressing problem; itís low earnings among people who donít graduate from college.

That doesnít mean that student loans arenít a problem, especially for students from low-income families who take on debt to finance a degree they donít finish or is not worth much (which it might be, if its from a for-profit institution). Many of these borrowers in default. Their debts are crushing because their education did not increase their earnings. Defaulting destroys their credit and hampers their lives.

Helping these borrowers does not require bailing-out higher earners too. A better solution is targeting debt relief and using resources to help students from low-income families thrive in college, by offering them more counseling, financial aid, and academic support.
We should do something

Student loans are also problematic because they contribute to the rising cost of tuition, which has ballooned well beyond inflation and become a growing burden for many families. Government loan guarantees and subsidies make it easy to take out debt, making students less price sensitive. This does not, however, require taxpayers to foot the bill for everyoneís tuition as a fix.

A better alternative is income-based debt payments, where students pay based on what they earn. If universities are paid based on student performance, they will need to become more price sensitive and have an incentive to lower costs.

Student debt is a pressing problem, but not such a huge, urgent one that it requires a blanket bail-out for high-earning Americans. It would be a better use of tax money to target the most vulnerable and better align the incentives of universities with the students they serve.
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Offline g

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Re: Subprime Student Loans
« Reply #20 on: April 26, 2019, 04:13:07 AM »
A student loan is an investment in one's self. It follows the same rules as any other investment...do it wisely.

I imagine most borrowers don't think about it that way, and even if they do, they aren't objective as to the risk adjusted value of that investment.

Hi Buddy J, pleasure to meet you.

You are correct of course when talking about adults or even young adults but wise investing is not the stuff one can expect of youth.

Peer pressure is a most important factor in this equation as is a government seeking control and deciding what is best for it's citizenry. Then there is the bankster element which views it as an excellent idea, the usury attached to the concept being irresistible to the Shylock.

My personal take is that the propaganda being heaved at these kids, the idea that if you don't go to college you will surely grow up to be a zero, poor, and unable to appreciate the good life from your perch on the back of a garbage pick up truck is very persuasive to youngsters who a very impressionable and look to their elders and peers for guidance.

Actually, many like myself consider it criminal exploitation because there is money and usury involved rather than just an opinion.

Being a gold bug also causes me grief in this matter as well, watching the evils of unlimited credit and fiat being created to foster this scam on many of our youth but gold and fiat are another topic.

                                   



 

Offline BuddyJ

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Re: Subprime Student Loans
« Reply #21 on: April 26, 2019, 08:22:04 PM »
A student loan is an investment in one's self. It follows the same rules as any other investment...do it wisely.

I imagine most borrowers don't think about it that way, and even if they do, they aren't objective as to the risk adjusted value of that investment.

Hi Buddy J, pleasure to meet you.

You are correct of course when talking about adults or even young adults but wise investing is not the stuff one can expect of youth.

Nice to meet you as well.

And it depends on the youth I imagine.

Quote from: Golden Oxen
My personal take is that the propaganda being heaved at these kids, the idea that if you don't go to college you will surely grow up to be a zero, poor, and unable to appreciate the good life from your perch on the back of a garbage pick up truck is very persuasive to youngsters who a very impressionable and look to their elders and peers for guidance.

I've seen more a correlation with what the parents do for a living. In families with college educated parents, it does appear to be common. In families without college educated parents, it seems like it isn't as common.

Purely personal observation.

Offline RE

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https://www.businessinsider.com/student-loan-debt-forgiveness-elizabeth-warren-economic-impacts-2020-election-2019-4

Elizabeth Warren's plan to forgive student-loan debt is costly, but it could actually pour money into the US economy
Sarah Gray


elizabeth warren Sen. Elizabeth Warren, a 2020 Democratic presidential candidate. Sergio Flores/Getty Images

    Democratic Sen. Elizabeth Warren of Massachusetts, a 2020 presidential candidate, has proposed erasing a good portion of student-loan debt and providing free public college.
    The plan was met with mixed reviews online. Some people were angry, saying they had already paid their loans back or chose a different college to avoid debt in the first place, while others praised her move.
    Josh Bivens, the research director at the left-leaning Economic Policy Institute, told INSIDER in an email that the "short-run macro benefits are neutral to good."
    Whether voters are fans of the plan or not ó and there are plenty who are not ó Warren's proposal has put student debt front and center in the 2020 election debate.
    Visit Business Insider's homepage for more stories.

Democratic Sen. Elizabeth Warren of Massachusetts, a 2020 presidential candidate, has proposed erasing a good portion of student-loan debt and providing free public college.

Her plan, released earlier this week, was met with mixed reviews on Twitter, with some users debating whether it was equitable to people who have already paid off their loans or who selected a different school to avoid education debt.

Meanwhile, some experts think a plan like Warren's could stimulate the US economy.
What the big deal with student debt?

Student debt in the United States ballooned to $1.57 trillion in the last quarter of 2018. It's held by more than 40 million borrowers, according to the US Department of Education. In 2017, the average amount of debt held by a graduate was $28,500.

This can lead debt-holders to postpone hitting some common benchmarks of adulthood (like buying a home), adding to long-term savings, or paying off other debt. CNBC reported that a Bankrate survey published earlier this year found that 73% of respondents had "delayed at least one major life milestone because of their student loan debt."
Drew Angerer/Getty Images
Warren's proposal is to lessen the burden on borrowers

She said it would:

    Cancel $50,000 of debt for those in households making less than $100,000 per year.
    Lessen the debt burden for those making between $100,000 and $250,000, canceling $1 of debt for every $3 in income above $100,000 ó for example, if you made $160,000, $30,000 of your student-loan debt would be canceled. (No debt cancellation would be offered for those making more than $250,000, the top 5% of earners.)
    Prevent taxing the canceled debt as income.
    Make debt-holders with private loans eligible for debt cancellation.
    Provide tuition-free public college to help future generations stave off student-loan debt.

Read more: Joe Biden's entrance into the 2020 presidential race will cause a seismic shift. Here are the rival contenders that are in the most trouble

Warren said in her blog post on Medium that 75% of people with student-loan debt would have it canceled and 95% would see some relief.

Warren also shared an economic analysis from Brandeis University, which found that the plan would have "a substantial impact on student debt forgiveness and would greatly benefit households with the least ability to repay" and those for whom higher education was not a major benefit, as well as help lessen the racial wealth gap.

Additionally, the analysis said Warren's plan could boost the economy.

"It would likely entail consumer-driven economic stimulus, improved credit scores, greater home-buying rates and housing stability, higher college completion rates, and greater business formation," it said.
monkeybusinessimages/Getty Images
What the experts say about Warren's proposal

Josh Bivens, the research director at the progressive-leaning Economic Policy Institute, told INSIDER in an email that the plan's "short-run macro benefits are neutral to good."

"This would certainly boost spending by households, who would be wealthier (since debt has been extinguished) and have more disposable income since debt service payments are no longer needed," Bivens wrote. "There is definitely research indicating that student loan payments are holding back home and car purchases ó particularly for young adults."

Bivens said that the overall effect, however, would depend on employment numbers and whether the Federal Reserve raises interest rates in response to more spending.

"My sense is that we still have a little bit of daylight between current conditions and unambiguous full employment ó so the extra spending really would create some more jobs and income," he said. "And the Fed has signaled that it might wait until inflation shows up in the data before raising rates."

In 2018, the Levy Economics Institute of Bard College published research on one-time student-debt cancellation, finding that "such a proposal could have significant benefits for the U.S. economy."

The researchers said that "student debt cancellation results in an increase in GDP, ranging from $861 billion to about $1,083 billion over the entire period, or on average between $86 billion and $108 billion per year." It would also spur job creation.

However, their research focused on debt cancellation for everyone, unlike Warren's plan, which is income-based.

Read more: The 15 states with the largest middle class

Not everyone is convinced that Warren's plan is the right way to give the economy a jolt. Beth Akers, a senior fellow at the Manhattan Institute, told CNBC that "we can think of better, more efficient ways" to provide an economic boost, adding that debt forgiveness often benefits mainly high earners.

The economist Ben Stein told Fox Business that the tuition-free-college aspect of the plan was "highly irresponsible."
Reuters/Mike Segar
What about the cost of this plan? Will it increase the deficit?

Bivens said that canceling all student loans would "boost the deficit by roughly $85 billion per year" for 10 years.

"To put this in some context, it's about a third as costly as the 2017 Trump tax cut, in fiscal terms," he said.

The Levy Economics Institute's research suggested that the effect of canceling all student loans (which Warren's plan would not do) would be "modest," roughly 0.29% 0.37% of gross domestic product.

Brandeis University estimated that Warren's one-time debt-cancellation proposal would cost the government a lump sum of $640 billion, while providing free public college would cost roughly $1.25 trillion over a decade.

Read more: The 30 highest-paying jobs in Texas, where everything's bigger ó including the salaries

Warren also put forth a revenue plan for the proposal: "a 2% annual tax on the 75,000 families with $50 million or more in wealth" and 3% for those making more than $1 billion.

Over a decade, this could raise $2.75 trillion, according to Emmanuel Saez and Gabriel Zucman, University of California economists who helped Warren with the proposal.
Student-loan debt is now front and center

Whether voters are fans of the plan or not, Warren's proposal makes student debt a 2020 campaign issue ó and one that 57% of millennials under age 30 view as a major problem, a Harvard Kennedy School Institute of Politics survey found.

Bivens said that in his opinion, the economic benefits are not even the best argument for forgiving debt.

"I think the stronger reasons are fairness and (paired with Warren's plan to make college debt-free going forward) a potentially large boost to college availability, and hence a more-educated and productive (let alone happier) workforce in the future," Bivens said.
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Offline g

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Re: Subprime Student Loans
« Reply #23 on: April 27, 2019, 04:56:26 AM »
A student loan is an investment in one's self. It follows the same rules as any other investment...do it wisely.

I imagine most borrowers don't think about it that way, and even if they do, they aren't objective as to the risk adjusted value of that investment.

Hi Buddy J, pleasure to meet you.

You are correct of course when talking about adults or even young adults but wise investing is not the stuff one can expect of youth.

Nice to meet you as well.

And it depends on the youth I imagine.

Quote from: Golden Oxen
My personal take is that the propaganda being heaved at these kids, the idea that if you don't go to college you will surely grow up to be a zero, poor, and unable to appreciate the good life from your perch on the back of a garbage pick up truck is very persuasive to youngsters who a very impressionable and look to their elders and peers for guidance.

I've seen more a correlation with what the parents do for a living. In families with college educated parents, it does appear to be common. In families without college educated parents, it seems like it isn't as common.

Purely personal observation.

Oh Yes, Please don't get me wrong. I'm not a Commie; well aware there are smart kids, extremely bright. We may be able to agree however, that they are a small minority. Most know nothing about wise investing in their sixties is my personal observation. 

Then there is the myriad of moral arguments to consider as well on this topic.

"Neither a Lender or Borrower Be"

Offline Eddie

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Re: Subprime Student Loans
« Reply #24 on: April 27, 2019, 11:15:53 AM »
I'm very ambivalent about forgiving student loans. On the one hand, the loans have been made deliberately predatory, which is one point I tried to make above. That makes me want to seen loan amnesty.

On the other hand, the way this is being sold in the media...that all of America's young people are broke because they dreamed of a college education but got shafted and we have to save them?

It's a false narrative. The articles all misrepresent the problem. The facts are clear. The problem is not that ALL students are in default. The whole default situation is about a LARGE NUMBER of SMALL LOANS that go bad...loans that often are NOT for real college at all, but for some kind of conduit scheme trade school or Online University.

Not to mention that a fair number of student loans were made because it was a form of welfare for people who lost jobs in the 2008 crash. Some of those student borrowers in default were desperate for money, and "going back to school" was a good alternative to not eating, but they were never likely to see it through.

What we need to do is REFORM the student loan system, and subsidize it with CHEAP loans or even free money, because in the long run it's good for the country. It used to be that way. Now it's a rip-off engineered by the banks.

And the BANKS are the ones going to get bailed out here if Warren forgives loans. It's laughable, really. Young people will vote for Warren hoping to get their loans forgiven, and if it passes, the biggest beneficiaries will be the banks, not the people with loans. A new conduit scheme will replace this one (or maybe they'll reboot it and make it even more predatory --- not beyond the scope of possibility.) And the people who voted to get loan forgiveness will pay taxes for their entire lives to make the banks COMPLETELY WHOLE.
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Offline Surly1

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Re: Subprime Student Loans
« Reply #25 on: April 27, 2019, 05:24:01 PM »
I'm very ambivalent about forgiving student loans. On the one hand, the loans have been made deliberately predatory, which is one point I tried to make above. That makes me want to seen loan amnesty.

On the other hand, the way this is being sold in the media...that all of America's young people are broke because they dreamed of a college education but got shafted and we have to save them?

It's a false narrative. The articles all misrepresent the problem. The facts are clear. The problem is not that ALL students are in default. The whole default situation is about a LARGE NUMBER of SMALL LOANS that go bad...loans that often are NOT for real college at all, but for some kind of conduit scheme trade school or Online University.

Not to mention that a fair number of student loans were made because it was a form of welfare for people who lost jobs in the 2008 crash. Some of those student borrowers in default were desperate for money, and "going back to school" was a good alternative to not eating, but they were never likely to see it through.

What we need to do is REFORM the student loan system, and subsidize it with CHEAP loans or even free money, because in the long run it's good for the country. It used to be that way. Now it's a rip-off engineered by the banks.

And the BANKS are the ones going to get bailed out here if Warren forgives loans. It's laughable, really. Young people will vote for Warren hoping to get their loans forgiven, and if it passes, the biggest beneficiaries will be the banks, not the people with loans. A new conduit scheme will replace this one (or maybe they'll reboot it and make it even more predatory --- not beyond the scope of possibility.) And the people who voted to get loan forgiveness will pay taxes for their entire lives to make the banks COMPLETELY WHOLE.

This is a really interesting post.

'When you say "the facts are clear," can you cite what you are referring to? You are pretty clear that "LARGE NUMBER of SMALL LOANS that go bad." You generally have a reason for being so adamant.

I share your disdain for Online University. the entire higher ed industry has been dissented by the prevalence of private online universities eager to hang debt on future tax donkeys and debt serfs in desperate search for that entry credential to a gate-kept profession. There are several in my own extended family, all paying off loans.

Back in the day, when people in our cohort went to school, "CHEAP loans or even free money" were the order of the day, because it was social policy to invest in our collective future by staking youth to a better future. Today, as you say, it's all about the Bankster Rake, and we don't give a damn about the future, because we've got a quarter to make and bonuses to collect.

People making $35K a year and making payments for decades on $50K+ of student loans are, needless to say, not buying houses or exploding Teslas.

So if we don't reform the student load system, banks get paid. If we do, banks get paid. When have banks ever taken a haircut?
"It is difficult to write a paradiso when all the superficial indications are that you ought to write an apocalypse." -Ezra Pound

Offline RE

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Re: Subprime Student Loans
« Reply #26 on: April 27, 2019, 05:41:21 PM »
When have banks ever taken a haircut?

Haircuts banks do take periodically.  What they don't take are BuzzCuts.  Because if you really sheared them, the monetary system collapses.  The whole system is predicated on the debt the banks issue.  Wipe out the debt, you wipe out the money.  Money=Debt you see.

Nobody in any position of power wants the monetary system to crash on their watch.  So they absorb the losses onto Da Goobermint balance sheet where it sits as an ever upward spiraling debt load that can't be paid off, it is irredeemable debt.  This works...until it doesn't.

When will it stop working?  If you can answer that question correctly, you can be richer than Bezos, Gates, Buffet & Suckerbug combined, for a few nano seconds after which the pile of Crypto you pulled in also turns worthless.

RE
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Offline Surly1

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Re: Subprime Student Loans
« Reply #27 on: April 27, 2019, 06:08:23 PM »
When have banks ever taken a haircut?

Haircuts banks do take periodically.  What they don't take are BuzzCuts.  Because if you really sheared them, the monetary system collapses.  The whole system is predicated on the debt the banks issue.  Wipe out the debt, you wipe out the money.  Money=Debt you see.

Nobody in any position of power wants the monetary system to crash on their watch.  So they absorb the losses onto Da Goobermint balance sheet where it sits as an ever upward spiraling debt load that can't be paid off, it is irredeemable debt.  This works...until it doesn't.

When will it stop working?  If you can answer that question correctly, you can be richer than Bezos, Gates, Buffet & Suckerbug combined, for a few nano seconds after which the pile of Crypto you pulled in also turns worthless.

RE

The miracle of fractional reserve lending.

Eight years ago, it was this:



Same as it ever was.
"It is difficult to write a paradiso when all the superficial indications are that you ought to write an apocalypse." -Ezra Pound

Offline RE

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Re: Subprime Student Loans
« Reply #28 on: April 27, 2019, 06:35:29 PM »
When have banks ever taken a haircut?

Haircuts banks do take periodically.  What they don't take are BuzzCuts.  Because if you really sheared them, the monetary system collapses.  The whole system is predicated on the debt the banks issue.  Wipe out the debt, you wipe out the money.  Money=Debt you see.

Nobody in any position of power wants the monetary system to crash on their watch.  So they absorb the losses onto Da Goobermint balance sheet where it sits as an ever upward spiraling debt load that can't be paid off, it is irredeemable debt.  This works...until it doesn't.

When will it stop working?  If you can answer that question correctly, you can be richer than Bezos, Gates, Buffet & Suckerbug combined, for a few nano seconds after which the pile of Crypto you pulled in also turns worthless.

RE

The miracle of fractional reserve lending.

Eight years ago, it was this:



Same as it ever was.

Don't forget what started the cascade.  Both Bear Stearns & Lehman Brothers got BuzzCuts, in fact they failed.  The rest of the system was teetering, until Hank the Skank pulled out the Bazooka.  It's the "same as it ever was" because the whole system depends on the banks NOT failing.  When they do (and they will), all the notional wealth out there will burn in the greatest bonfire of paper wealth in all of recorded history.

RE
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Offline Eddie

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Re: Subprime Student Loans
« Reply #29 on: April 28, 2019, 12:14:00 PM »
'When you say "the facts are clear," can you cite what you are referring to? You are pretty clear that "LARGE NUMBER of SMALL LOANS that go bad." You generally have a reason for being so adamant.


Most of the articles concentrate on things like the total mount of debt, how much is in default, the median loan size, the average loan size.......like this, for instance. They all say the same things.

$1.56 trillion in total U.S. student loan debt
44.7 million Americans with student loan debt

11.5% of student loans are 90 days or more delinquent or are in default

Average monthly student loan payment (among those not in deferment): $393

Median monthly student loan payment (among those not in deferment): $222


That is a deliberate obfuscation of the reality of the problem. You have to take a deeper dive to understand.

Here's some stuff that matters.

Five schools are subject to a loss of eligibility based on a cohort default rate of 40 percent or more for one year, while five schools are subject to a loss of eligibility based on a cohort default rate of 30 percent or greater for three years. Two schools are subject to a loss of eligibility based on a cohort default rate of 40 percent or more for one year and a rate of 30 percent or greater for three years. In certain circumstances, schools may avoid sanctions by submitting a successful adjustment, appeal, or data challenge.

All institutions with a default rate that is equal to or greater than 30 percent must establish a default prevention task force that prepares a plan to identify the factors causing the school's cohort default rate to exceed 30 percent and submit the plan to the Department.

Two schools subject to sanctions for high FY 2014 and FY 2015 cohort default ratesóSoutheast Kentucky Community and Technical College and United Tribes Technical Collegeówill not lose eligibility to participate in the federal student aid programs, if certain conditions are met, due to a provision written into the Consolidated Appropriations Act of 2018. The provision, which will last until the end of FY 2019, permits the secretary to exempt schools located in high poverty areas with high default rates.

https://www.ed.gov/news/press-releases/national-student-loan-cohort-default-rate-falls



Kentucky? Did you catch that?

You have to really dig to find stats on the breakdown of defaults by loan size. But here it is. I can't do a screen shot with this computer, but look at the Figure 6 graphic in the linked report below. The bigger the loan size, the less likely it is to be in default. (Until the loans get VERY large, bigger than 75K, when it starts to be a problem again.)

Borrowers who owe less than $5,000 at the start of repayment are the most likely to default within four
years; 32 percent of these borrowers defaulted at least once. But high-balance borrowers sometimes
default. About 15 percent of borrowers who owed more than $35,000 at the start of repayment
defaulted on at least one loan over the next four years. But the proportion of borrowers with a large
debt load is small (figure 6).

https://www.urban.org/sites/default/files/publication/98884/underwater_on_student_debt.pdf



Like most political footballs, the facts are not driving the debate. Polls and public perception, driven by misleading media stories, are shaping the political process and the legislation that is likely to be written here.

Making it look like a monolithic problem that is destroying the future of a whole generation, when the facts are completely in support of a much different story, is just symptomatic of how we do things in this country. It's nothing but propaganda.

There seems to be a COMPLETE lack of press on how BANKS would be impacted by student loan amnesty. But all these loans are government guaranteed, which is why the banking industry is willing to loan money to people who don't have a pot to piss in.

Debt ALWAYS gets paid by someone.

Banks take haircuts? Historically, yes. Lately, not so much. The 1.5 Trillion student debt, if it's forgiven, will NOT be paid by the banks. If you think that, you are pretty clueless.








« Last Edit: April 28, 2019, 01:33:27 PM by Eddie »
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