AuthorTopic: 🎓 Subprime Student Loans  (Read 12228 times)

Offline RE

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🎓 Subprime Student Loans
« on: September 29, 2012, 07:26:11 PM »
From Tyler over on Zero Hedge.

Bullish for sure. BTFD.  Gold, Bitchez!

RE

The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default
 

Submitted by Tyler Durden on 09/28/2012 20:52 -0400
  • Ben Bernanke
  • Countrywide
  • default
  • Default Rate
  • Federal Reserve
  • New Century
  • President Obama
  • Reality
  • recovery
  • Sallie Mae
  • Student Loans
  • Subprime Mortgages



    Whereas earlier today we presented one of the most exhaustive presentations on the state of the student debt bubble, one question that has always evaded greater scrutiny has been the very critical default rate for student borrowers: a number which few if any lenders and colleges openly disclose for fears the general public would comprehend not only the true extent of the student loan bubble, but that it has now burst. This is a question that we specifically posed a month ago when we asked "As HELOC delinquency rates hit a record, are student loans next?" Ironically in that same earlier post we showed a chart of default rates for federal loan borrowers that while rising was still not too troubling: as it turns out the reason why its was low is it was made using fudged data that drastically misrepresented the seriousness of the situation, dramatically undercutting the amount of bad debt in the system.
    Luckily, this is a question that has now been answered, courtesy of the Department of Education, which today for the first time ever released official three-year, or much more thorough than the heretofore standard two-year benchmark, federal student loan cohort default rates. The number, for all colleges, stood at a stunning 13.4% for the 2009 cohort. The number is stunning because it is nearly 50% greater than the old benchmark, which tracked a two year default cohort, and which was a "mere" 8.8% for the 2009 year. Broken down by type of education, and using the new improved, and much more realistic benchmark, for-profit institutions had the highest average three-year default rates at 22.7 percent, with public institutions following at 11 percent and private non-profit institutions at 7.5 percent. In other words, more than one in five federal student loans used to fund private for-profit education, is now in default and will likely never be repaid!
    And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.
    Ladies and gentlemen: meet the new subprime.
    Another that quietly reported today on the change in the Department of Education's default tracking methodology was Bloomberg in "Student-Loan Default Rates Soar as Federal Scrutiny Grows." Needless to say, it was not impressed, because the new data indicated that there had been a concerted push by all sides to misrepresent the severity of the student debt problem, by over 50%. The "why" is quite simple:

     
     
    The Education Department has revamped the way it reports student-loan defaults, which the government said had reached the highest level in 14 years. Previously, the agency reported the rate only for the first two years payments are required. Congress demanded a more comprehensive measure because of concern that colleges counsel students to defer payments to make default rates appear low.
     
    “Default rates are the tip of the iceberg of borrower distress,” said Pauline Abernathy, vice president of The Institute for College Access & Success, a nonprofit based in Oakland, California.
     
    On the stump, President Obama has touted an executive order that eases the process for applying for a loan program that lets students make lower payments tied to their income -- easing their burden and making it less likely they will default.
     
    Under the new three-year measure, colleges with default rates of 30 percent or more for three consecutive years risk losing eligibility for federal financial aid. Schools can also be barred from the program if the rate balloons to 40 percent in a single year. The sanctions don’t take effect until results are released in 2014.

    There it is again: a mega-government which gives amply with one hand, and yet with the other skews the incentives in the system to represent reality as far better than it truly is. One way to underwhelm reality and to soothe the blow of the true extent of the popped student loan bubble was using a shorter data cohort.

     
     
    Some for-profit colleges encourage students to defer
    payments in their early years, in an effort to keep down default rates that could jeopardize their federal funding, according to a report by the Senate Committee on Health, Education, Labor and Pensions released in July.
     
    The report accused for-profits of using the tactic to manipulate their default rates. It singled out the role of SLM Corp. (SLM), the largest U.S. student-loan company commonly known as Sallie Mae. A subsidiary, General Revenue Corp. counsels for- profit colleges on keeping down default rates. University of Phoenix, owned by Apollo Group Inc. (APOL), is a customer, according to the Congressional report

    Whether or not the reason for the government to demand more accurate data was to scapegoat the private sector yet again, what it did instead if expose just how deep the student loan hole already is. Because now that we know the revised default data, we can put it together with the recently revised as of a month ago revised total student loan notional number. Recall from the Fed:

     
     
    The revisions to the data are fairly substantial: as of our August report, 2011Q2 student loan balances were reported at $550 billion. We now estimate that student loans outstanding in that quarter (2011Q2) amounted to $845 billion, $290 billion or 53.7% higher than we reported earlier. These previously excluded loans were also missing from the total debt outstanding; as a result, our estimate of total debt outstanding in 2011Q2 is also revised upward by $290 billion (2.5%).

    This is what student debt looked like a month ago when we first reported the data:

    One can see why everyone in the Federal administration has been so reticent about disclosing the true state of the Federally-funded student loan bubble. Because if one simply assumes the rising default rate has kept constant across all recent cohorts since the updated 2009 number, it would mean broadly speaking, that of the $914 billion in Federal Student Loans at least 13.4% will end up in default. Over $120 billion.
    Of course all else is never equal: Federally funded student loans are now increasing at a rate of over $60 billion per quarter. This means that in just about 18 months, the total size of the Federal student loan market will hit $1.3 trillion. Why is that number important? Because that is how big the subprime market was at its peak in late 2007, when everything went to hell and the last credit bubble popped. From Responsible Lending:

    As can be seen on the table above, 20% of all subprime mortgages was then expected to default (the ultimate number ended up being far higher). Note that as mentioned above, already over 22% of for-profit student loans are in default.
    In other words, the Federal student loan bubble has not only popped, but has all the carbon copy makings of the next subprime crisis. Only when it pops it won't be New Century and Countrywide Financial on the hook: it will be all of America's taxpayers. Remember: these are Federal loans.
    And the biggest problem: unlike housing where there is always at least some recovery of collateral, as the house remains, with student debt there is no recoverable asset as the asset is a human being. Granted said human effectively becomes a debt slave courtesy of the non-discharge nature of the student loan, which can not be wiped out even with a personal bankruptcy, but assuming the taxpayer can recover any money using discounted garnished wage flows of what are effectively perpetual(ly discouraged) debt slaves of the system, is simply idiotic.
    We give Bernanke at most 2 years before everyone is aware of the true extent of not only the student debt bubble, but that it has already popped, at which point student loans will be the next "asset" to be monetized by the Federal Reserve.
« Last Edit: July 09, 2019, 07:05:36 AM by RE »
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Offline widgeon

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Re: Subprime Student Loans
« Reply #1 on: September 30, 2012, 05:10:56 AM »
This student loan situation is the most egregious violation of the citizenry by TPTB.  The system is set up to entice naive & believing young people into outrageous loans before they even know what they've done.  Also, whereas before loans covered pretty much only tuition, housing (on campus), etc. now yoiu can get enough to actually live a lower middle class existence - as long as the loans keep coming.

I'm read some, but am certain, that there are many 50 & 60 year olds that are "going back to school" for the sole purpose of getting access to the student loan system where they can get $20k or so living expenses as long as they are signed-up for a couple classes.  This is another case where the "soup-lines" are hidden.

Offline g

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Re: Subprime Student Loans
« Reply #2 on: September 30, 2012, 05:57:32 AM »
This student loan situation is the most egregious violation of the citizenry by TPTB.  The system is set up to entice naive & believing young people into outrageous loans before they even know what they've done.  Also, whereas before loans covered pretty much only tuition, housing (on campus), etc. now yoiu can get enough to actually live a lower middle class existence - as long as the loans keep coming.

I'm read some, but am certain, that there are many 50 & 60 year olds that are "going back to school" for the sole purpose of getting access to the student loan system where they can get $20k or so living expenses as long as they are signed-up for a couple classes.  This is another case where the "soup-lines" are hidden.

It was the most horrific crime of the banksters to date widgeon.

If ever a group of loans should be totally forgiven it is these. They conned impressionable young trusting kids into slavery for life with the school teachers and colleges accomplices in their hateful crime of lies and phony promises.

If a thirty year old has to have something now and goes into hock with clearly published rates of interest on his credit card, Frig him. Could care less what they do to him with their usury, just another ass hole that couldn't save up to buy it. A sixteen year old kid listening to his parents, teachers, and guidance councilors as this being the proper way to make it in the world is truly a national shame and disgrace.

What a way to build a strong democracy, everyone starting out adulthood with the bankster's chains wrapped around their neck.               :exp-cry: :exp-angry: :exp-cry: :exp-angry:
« Last Edit: September 30, 2012, 09:48:37 AM by Golden Oxen »

Offline widgeon

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Re: Subprime Student Loans
« Reply #3 on: October 01, 2012, 02:36:30 PM »
Here are a couple successful debtors trying to get out from their pile.

http://newsok.com/oklahomas-1st-congressional-district-candidates-have-large-student-loan-debts/article/3714700

The "democrat" has over $100k in loans and an income $36k ... disaster.

The 'conservative' "republican" (and his wife) have over $350k in loans and $111k in income.


Offline RE

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Blanket Student Debt Amnesty Now
« Reply #4 on: April 19, 2016, 10:49:07 PM »
We haven't chatted this monster up in a while.

RE

http://www.counterpunch.org/2016/04/18/blanket-student-debt-amnesty-now/

April 18, 2016
Blanket Student Debt Amnesty Now

by Mike Whitney


A couple weeks ago the Wall Street Journal confirmed our worst fears about the student loan program, that is, that it was going to blow up in the government’s face just like all the other gigantic debt-bubbles that preceded it. For the sake of background, here’s a brief excerpt from the article that will bring readers up-to-date:

    “More than 40% of Americans who borrowed from the government’s main student-loan program aren’t making payments or are behind on more than $200 billion owed, raising worries that millions of them may never repay.

    The new figures represent the fallout of a decadelong borrowing boom as record numbers of students enrolled in trade schools, universities and graduate schools.

    While most have since left school and joined the workforce, 43% of the roughly 22 million Americans with federal student loans weren’t making payments as of Jan. 1, according to a quarterly snapshot of the Education Department’s $1.2 trillion student-loan portfolio.” (More Than 40% of Student Borrowers Aren’t Making Payments, Wall Street Journal)

While it all sounds very shocking, the real eye-popper was buried deep in the text where it was most likely to be ignored. Here it is:

    “Carlo Salerno, an economist who studies higher education and has consulted for the private student-lending industry, noted that the government imposes virtually no credit checks on borrowers, requires no cosigners and doesn’t screen people for their preparedness for college-level course work. “On what planet does a financing vehicle with those kinds of terms and those kinds of performance metrics make sense,” he said.” (WSJ)

Let’s see if I got this right: The Fed, government regulators and the entire political establishment looked the other way while the mortgage industry cranked out trillions of dollars of “toxic” subprime liar’s loans that Wall Street bundled into garbage bonds that wound up blowing up the entire global financial system and plunging the world into a severe recession from which we still haven’t recovered. Then, a couple years later,  they start pumping up another lethal trillion-dollar credit bubble, this time comprised of equally toxic “student liar’s loans”?

Is that what they’re saying?

That’s it, alright. This is why there should be blanket amnesty for all the student debt generated in the last decade. It’s because the whole thing was another filthy credit-swindle from the get go.

And let’s be honest; it’s not the government lenders who were scammed in this deal, it’s the students. They’re the victims, in the same way that the applicants, who borrowed hundreds of thousands of dollars for mortgages they could never repay, were the victims. The lender is ALWAYS responsible when a loan that goes belly up.  ALWAYS.  Because it’s their freaking job to figure out who can pay and who can’t. Period. That’s all they do, lend money. And they’re pretty damn good at it too, when they actually expect to get repaid, which in this case, they don’t. That’s why we know it’s a scam.

So now we’re supposed to believe that no one could have foreseen this trainwreck ahead of time. Is that it? Is that what Obama and the media and the rest of the crooked financial establishment want us to believe; that no one could known that 40 percent of the borrowers were going to ‘stiff’ the government?

Baloney. The handwriting was on the wall from the very beginning. Take a look at this interview I did with professor Alan Nasser in 2011.

    M Whitney–Is it fair to say that the student loan industry is a scam that targets borrowers who will never be able to repay their debts?

    Alan Nasser—It’s as fair as fair can be. First, the student loan industry is huge – a large majority of students from every type of school are in debt. Debt is held by 62 percent of students enrolled at public colleges and universities, 72 percent at private non-profit schools and 96 percent at private, for-profit (“proprietary”) schools. It was announced last summer that total student loan debt, at $830 billion, now exceeds total US credit card debt, which is itself bloated to the bubble level of $827 billion. And student loan debt is growing at the rate of $90 billion a year. So we’re not talking small change.

    How many of these students are subprime borrowers? That is, how closely do student loans resemble junk mortgages? The answer hinges on three factors: how these loans are rated, how likely the borrower is to repay, and the default rate on student loans.

    …the Department’s Inspector General Office employed a more realistic method in its 2003 audit, which calculated lifetime risk. It estimated that over their lifetime between 19 and 31 percent of college freshmen and sophomores would default on their loans… For community college students, the prospects were grimmer still: between 30 and 42 percent were expected to default. And the future was most discouraging for students at for-profits: between 38 and 51 percent were anticipated to default. You can see that the default rate among student borrowers is expected to be higher than that for subprime home mortgages.” (The Student Loan Swindle, CounterPunch)

Repeat: “between 38 and 51 percent were anticipated to default” … “Higher than subprime mortgages.”

Bottom line: The shysters who issued these roadside bombs knew from the beginning that a high percentage of them were going to blow up. What more proof do you need that the whole thing is crookeder then hell?  And this interview was conducted back in 2011, which means that these credit chiselers knew what they were doing from the very beginning. The Obama-Fed-Wall Street cabal wanted to inflate another massive credit bubble so the thieving lenders could skim heftier profits while Obama crowed about his great economic recovery. That’s what it’s all about. And they didn’t care that gullible college kids were being drawn-and-quartered so they could make more dough either.

What kind of country is this anyway, where the government deliberately bamboozles its kids about the “value of a good education” just so they can extort as much money as possible from them in the future?

Here’s Nasser again:

    “Alan Collinge of StudentLoanJustice.org has shown that the Department of Education makes more on defaulted loans than it does on loans in good stead. Washington has just as much an interest in encouraging student loan defaults as do, for example, collection companies, which obviously live off defaults.”

“Cha-ching!” That’s the happy sound of your predatory government fleecing your children.

It’s outrageous!

Of course the private lenders make even more than the government does because they’ve developed a whole system for extracting as much wealth as possible from their unwitting victims. No surprise there. Private lenders always get their pound of flesh and then-some.

So here’s a question for you: Why do you think Congress passed legislation making it impossible to discharge student loan debt through bankruptcy just months before the surge of student lending began? Do you think it was all just a big coincidence?

Give me a break! This thing has “setup” written all over it. Congress knew what they were doing.  They knew they were part of  a big sting operation targeting credulous students who never guessed that their government was just a bunch of lousy shakedown artists.  And now congress can pat themselves on the back for a job well done, for luring millions of millennials into a lifetime of indentured servitude. That’s quite an accomplishment, don’t you think?

Hurrah, for Congress! The scumbags.

Here’s Alan Nasser again:

    “Because Congress chose to withhold key consumer protections from student borrowers …the latter are virtually forced to enroll in “loan rehabilitation” programs. The borrower is subject to a form of extortion, whereby (s)he essentially buys her way out of allegedly more severe penalties with payments that are rarely applied to principal or interest on the defaulted loan. These outlays are in effect the price of access to a substitute loan, accompanied of course by additional fees. The new loan is typically larger than the defaulted one…

    The fee system is at the heart of the private lenders’ affection for default. It gives to loan guarantors the same kind of interest in default that is so obvious in the case of collection companies. Collinge has analyzed IRS filings of guarantors of federal student loans. It turns out that guaranty agencies average about 60 percent of their income from fees alone. If the default rate declines, so do the fees and income of the guarantors.” (CounterPunch)

Get the picture? So the worse it gets for the students, the better it gets for the lenders. Students get a lifetime of drowning in red ink, and lenders get a nice fat bonus of 60 percent off the top. Nice, eh?

Don’t you love America?

Let’s cut to the chase: Students have been defrauded on a massive scale by the credit Mafia, the brotherhood of crooks (Gov and private) whose only goal in life is to suck as much blood as humanly possible out of their victims and then move on to the next. That’s how the game is played.

The only way to defeat this cadres of racketeers is to stop paying. That’s it. No more money for you.

We’re not talking about lower rates, or partial relief or a temporary debt moratorium. Oh, no. We’re not looking for any namby-pamby, half-loaf “loser” solution.  We’re talking about total, blanket student debt amnesty. Wipe the slate clean. End the debt now.

And if it crashes the US Treasury, well, good riddance.
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MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.
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Offline MKing

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Re: Subprime Student Loans
« Reply #5 on: April 20, 2016, 06:20:05 AM »
I don't buy the conspiratorial intent angle expressed above, Congress knew what it was doing, screwing over folks for fun and profit. But sitting here with a daughter headed off to college in 4 months, I can see the traps being set for the average parent of the normal kid heading off to college. There is actually a limit to what an undergraduate can borrow in the federal guaranteed system, a limit that skyrockets for graduate work and would appear to be the main vehicle for accumulating far more debt than is reasonable for a college kid. And as I have noted during my hiring participation, those with just undergraduate degrees can't even make the cut in the job environment where I need PhD's and Master degree folks to even have a fair chance of finding someone who can think...although to be honest a month or three back we acquired a young lady who appears to be doing very well, and she only has a Bachelors in Math, and is working on her Masters in Stats.

Anyway, the real trap appears to be for the parents. THEY are the ones being encouraged to borrow without limit for their children, and this is a real issue because it preys upon the parents degree of buy in to the "American dream", your kids doing better than yourself, so you had better borrow borrow borrow to make it happen! A crock in many ways, as ultimately it is still borrowing, and borrowing for a college education is in my opinion a better thing than even tangible assets...but it still carries risk, with no backup plan should the risk go bad.

And you can bet that the day comes when Bernie's ideas work out, that it will be the STUDENT'S debt that gets erased/forgiven/handled, but NOT the parents.

However, at a range of 4 months this is all visible. And amusing, in one case my daughter called and asked if she had qualified for a particular scholarship, and they said no she hadn't gotten that one, but they were happy to tell her about this $6G award she HAD received.   She looks around at her package, and the only thing that matches that description is the federal guaranteed loan. She says "that isn't a award, it is a loan!" and they say "oh no, not everyone gets these, it is an AWARD and it is all for YOU!".

So not even the student is dumb enough to fall for some of what they are selling, except of course, plenty are.
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💸 U.S. Student Debt in ‘Serious Delinquency’ Tops $166 Billion
« Reply #6 on: February 18, 2019, 01:12:40 AM »
https://www.bloomberg.com/news/articles/2019-02-16/u-s-student-debt-in-serious-delinquency-tops-166-billion?srnd=premium

U.S. Student Debt in ‘Serious Delinquency’ Tops $166 Billion
By Alexandre Tanzi
February 16, 2019, 5:01 AM AKST

    Amount in arrears reaches a record high as college costs rise
    If the loans aren’t repaid, federal deficits also will rise


Law Professor Anita Hill Addresses Wesleyan Commencement Ceremony
Photographer: Eduardo Munoz Alvarez/Getty Images North America

Student-loan delinquencies surged last year, hitting consecutive records of $166.3 billion in the third quarter and $166.4 billion in the fourth.

Bloomberg calculated the dollar amounts from the Federal Reserve Bank of New York’s quarterly household-debt report, which includes only the total owed and the percentage delinquent at least 90 days or in default.

That percentage has remained around 11 percent since mid-2012, but the total increased to a record $1.46 trillion by December 2018, and unpaid student debt also rose to the highest ever.

U.S. student debt 90-days or more delinquent or in default

Delinquencies continued to climb even as the unemployment rate fell below 4 percent, suggesting the strong U.S. job market hasn’t generated enough wage growth to help some people manage their outstanding obligations.

Income levels for graduates “are not necessarily high enough for debt payments overall,” said Ira Jersey, Bloomberg Intelligence interest-rate strategist. “If you have a choice to pay your student loan or for food or housing, which do you choose?”

The delinquencies also have broader implications. Because most of the loans are government-sponsored, they probably won’t hurt the economy the way mortgage debt did in 2007, Jersey said. “But incrementally, it does mean higher federal deficits if the loans are not repaid.”


Record level of student debt shows little sign of slowing

The total in arrears is about twice the amount the U.S. Treasury provided to bail out the auto industry during the last recession.

Loans at least 90 days past due are considered to be in “serious delinquency.’’ The age group transitioning into this category at the fastest pace is 40-to-49 year olds; that’s partly because of parents borrowing to pay their children’s expenses.

Middle Age Pain

Most rapid transition to serious delinquency is among 40-49 year olds

Source: New York Fed Consumer Credit Panel/Equifax

The cost of higher education has roughly doubled in the past 20 years, and the Federal Reserve Bank of St. Louis recently posted a blog entry asking “Is College Still Worth It?’’ The answer was not a definitive yes. One of the conclusions: “In terms of wealth accumulation, college is not paying off for recent college graduates on average -- at least, not yet.’’


Pace of increase in U.S. college costs was the lowest on record last year

Some schools have taken note, providing more support. The percentage increase in tuition at Cornell for the 2019-2020 academic year “is the lowest it has been in decades, and we are budgeting for a significant increase in financial aid,’’ the university said on Feb. 11. And 2019-2020 will be the seventh consecutive year Purdue University hasn’t boosted room and board rates.

Still, in-state tuition and fees at public four-year institutions rose at an average rate of 3.1 percent a year beyond inflation in the past decade, according to the College Board.
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Offline RE

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🎓 These five charts show how bad the student loan debt situation is
« Reply #7 on: April 25, 2019, 12:27:42 AM »
Go to the link to view the charts.  They're interactive, don't paste well.

RE

https://www.nbcnews.com/news/us-news/student-loan-statistics-2019-n997836

These five charts show how bad the student loan debt situation is


Data Graphics
These five charts show how bad the student loan debt situation is
Elizabeth Warren just proposed canceling student loan debt for most debtors.
Image: Students walk through the campus of the University of North Carolina at Chapel Hill North Carolina
Students walk through the campus of the University of North Carolina at Chapel Hill, North Carolina, U.S.Jonathan Drake / Reuters file
April 24, 2019, 2:00 AM AKDT
By Nigel Chiwaya

One in five adult Americans carry student loan debt. The issue returned to the headlines this week, when Democratic presidential candidate Sen. Elizabeth Warren of Massachusetts proposed canceling this debt for more than 40 million Americans. Here's a look at the landscape.

As many as 44.7 million Americans have student loan debt, according to a 2018 report by the Federal Reserve Bank of New York. The total amount of student loan debt is $1.47 trillion as of the end of 2018 — more than credit cards or auto loans.

Most Americans with student debt are young. But adults 60 and older — who either struggled to pay off their own loans or took on debt for their children or grandchildren — are the fastest-growing age cohort among student loan borrowers.

Persis Yu, an attorney at the nonprofit National Consumer Law Center, said seniors are a sizable portion of the clients she sees. "The number of seniors with student loan debt has exploded," Yu said. "We're not just talking about kids and millennials. It impacts a large swath of our population."

More than three out of four borrowers owe less than $50,000. The Warren proposal would wipe out the first $50,000 of debt of anyone with a household income below $100,000 a year.

The average monthly student loan payment ranges from $200 to $300, according to a report from the Federal Reserve. Many borrowers struggle to repay their loans. The national default rate, a U.S. Department of Education measurement of the number of borrowers who start repayment, then default in the next two to three years, was 10.8 percent among those who started repayment in 2015, the most recent data available.

Experts say that borrowers with low balances are the most likely to default.

“A lot of it has to do with the level of education,” Yu said. “You may have taken out some debt to go to college but for whatever reason, you didn't finish. So you have the burden but you don't have the value of that credential to allow you to earn as much as you need.”

"We don't really have a student loan debt crisis. We have a college completion crisis," Mark Kantrowitz, publisher of SavingForCollege.com, said. "The people who drop out of college are the ones who are defaulting on their loans."
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Defaulting has serious consequences.

“Most of the borrowers we see are in default on their loans,” Yu said. “Most have never heard of income-based repayments. Their wages were garnished, their tax refunds were taken.”

For borrowers who can't afford to make their regular payment, the government offers payment plans that are tied to their household income. However, fewer than 20 percent of borrowers participate in these plans.

Yu, whose clients usually come to her after defaulting on loans, says income-based repayment plans help reduce defaults. But the process of enrolling is difficult, with paperwork that can get lost, renewal notices that aren't clear and requirements that vary from lender to lender.

"For a family on SNAP benefits, the bureaucratic nightmare of trying to get into an income-based repayment plan is not something they need," Yu said, referring to the Supplemental Nutrition Assistance Program for low-income individuals and families.

Of the more than 1.3 million people who applied to an income-based repayment plan during the Department of Education’s 2018 fiscal year, almost three-quarters earned less than $100,000, making them eligible for the full amount of loan cancellation under the proposed Warren plan.

See more NBC News data graphics projects, including our report on the wealth tax and income inequality.
Nigel Chiwaya

Nigel Chiwaya is a data reporter for NBC News.
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Offline K-Dog

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Re: Subprime Student Loans
« Reply #8 on: April 25, 2019, 07:36:34 AM »
Debt should not be cancelled but loan interest should be waved as long as regular payments are made of at least 15% of what a defaulted payment would have been.

KDog has spoken.

Quote
Income levels for graduates “are not necessarily high enough for debt payments overall,” said Ira Jersey, Bloomberg Intelligence interest-rate strategist. “If you have a choice to pay your student loan or for food or housing, which do you choose?”

This is always true.  It was true for me.  Eventually I paid my pittance of a loan  off in a lump sum when winds finally filled my sails.  If I was still in the doldrums I'd still owe.  I wound up paying triple what was originally borrowed.  My debt was never that big but is individual debt that big now?

Choices choices.





Weave that basket!



Under ideal conditions of temperature and pressure the organism will grow without limit.

Offline Eddie

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Re: Subprime Student Loans
« Reply #9 on: April 25, 2019, 10:02:22 AM »
The article is a very typical misrepresentation of the facts.

A lot of defaulters are (a) drop-outs who probably never belonged in college, or (b) people who went into debt for schools other than college....like some kind of scammy electronics school like DeVry or even Barber College (I know they don't call it that anymore).

A large percentage of the loans in default are small loans. They will mostly never get paid back. Very few loans taken out by people who end up as high earners go into default. The government is the bagholder already. The only thing forgiving loans does is to write off noncollectable debt.

 But hey, my son owes a lot, so by all means, write it off. But it probably won't happen, and he will bust his ass and pay it off. My daughter, who graduates with a masters next week, has already paid back half her loans.  My son-in-law got his paid in a couple of years. They're all musicians and artists.....not exactly big money earners.

The government should be roasted for soaking these kids in the first place..... with high interest loans that have made the banks richer than God. Since the mid-80's (about the time I graduated) it's been one of the most evil and unfair conduit schemes to ever occur here in the Land of the Not-So-Free.

Elizabeth Warren....she was in the Congress during most of this shameful period, so she doesn't get a pass from me.....although she generally voted in favor of the little guys, which is to her credit. Before she was in Congress she was a tenured professor, so she is part of the university faculty and admin generation that let our colleges go bananas on administrative growth and its associated costs, which is a big part of what has made college tuition so high.

So she is complicit there too. But in today's world she is what passes for one of the White Hats.

What makes the desert beautiful is that somewhere it hides a well.

Offline RE

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Re: Subprime Student Loans
« Reply #10 on: April 25, 2019, 01:06:50 PM »
A lot of defaulters are (a) drop-outs who probably never belonged in college, or (b) people who went into debt for schools other than college....like some kind of scammy electronics school like DeVry or even Barber College (I know they don't call it that anymore).

If they don't "belong" in college, where do they belong?  ???  :icon_scratch:  The jobs in manufacturing that paid HS grads a living wage are long since gone to lower paid labor in Mejico, China and India.  Even if you raised the minimum wage for Barristas and Burger-Flippers, how many of them do you really need?  Particularly since those jobs are being automated out of existence anyhow.  Not to mention of course, even at a min wage of $15/hr, you're not making enough money to buy a McMansion or an exploding Tesla either.  How do these folks afford to pay their dental bills?  Where do you get your clients?  If Medicare is going to pay for them all, your taxes need to go up to pay for that.

The problem here is one of economics of course, and indeed most of this is irredeemable debt.  However, that debt has been rehypothecated many times over, and if you write it all down it undermines the capital structure of all the banks that issued loans or bought securities based on that notional, never to be repaid money.  If you have Da Federal Goobermint take the loss, that dumps another $Trillion$ onto the national debt, again your taxes have to go up.

It's a Wicked Problem.

RE
« Last Edit: April 25, 2019, 01:45:15 PM by RE »
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Offline Eddie

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Re: Subprime Student Loans
« Reply #11 on: April 25, 2019, 02:50:52 PM »
It's not nearly as big a problem as it's made out to be. It amounts to banks making bad loans because the government pledged to make them whole. Easy money.....high interest loan assets for the banks. They never had any incentive to vet the borrowers, and the government's policy of giving money to any idiot that could breathe, for any sort of stupid educational scam, made it impossible anyway.

They could have made low interest loans in the first place. That's why it's a conduit scheme. The government let the banks bilk the borrowers. This started under Reagan. I was still getting loans when it began. It even affected me.

The government is already making the banks whole, so the defaults are already being paid by the taxpayer.

The only thing an amnesty does is to wipe the credit reports clean for a bunch of people who will quite likely have a bad credit report again in fairly short order.

They lend money for fucking "cosmetology school". How many new cosmetology grads does the country need? Apparently a lot less than we're graduating. That's one of the big default groups.

Bread and circus.

What makes the desert beautiful is that somewhere it hides a well.

Offline RE

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Re: Subprime Student Loans
« Reply #12 on: April 25, 2019, 03:18:37 PM »
It's not nearly as big a problem as it's made out to be.

I disagree.  Right now, Da Goobermint is only paying a fraction of the total indebtedness.  Most of the loans are still being carried on the books as NPAs. Writing down all that debt is a much bigger deal.

RE
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Offline Ashvin

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Re: Subprime Student Loans
« Reply #13 on: April 25, 2019, 03:25:54 PM »
It's not nearly as big a problem as it's made out to be. It amounts to banks making bad loans because the government pledged to make them whole. Easy money.....high interest loan assets for the banks. They never had any incentive to vet the borrowers, and the government's policy of giving money to any idiot that could breathe, for any sort of stupid educational scam, made it impossible anyway.

They could have made low interest loans in the first place. That's why it's a conduit scheme. The government let the banks bilk the borrowers. This started under Reagan. I was still getting loans when it began. It even affected me.

The government is already making the banks whole, so the defaults are already being paid by the taxpayer.

The only thing an amnesty does is to wipe the credit reports clean for a bunch of people who will quite likely have a bad credit report again in fairly short order.

They lend money for fucking "cosmetology school". How many new cosmetology grads does the country need? Apparently a lot less than we're graduating. That's one of the big default groups.

Bread and circus.

You're leaving out one of the main culprits - college administrators who raise tuition and let all kinds of people in because they know the other culprits (government, banks) will make sure their institutions get paid, and then so do they. Most of the professors still get paid shit. They (administrators) are the ones who are supposed to have some responsibility for the students of their colleges, but instead they are giving them worthless educations and selling them into debt slavery.

Almost every client or potential client I have spoken with has outstanding student loans these days. There is some evidence that the bankruptcy rules for discharging these loans are getting a little more flexible in some jurisdictions, at least. I understand the moral hazards involved in that, but I have to agree with RE that unaffordable student loans is a huge problem and a huge weight on the economy and all manner of working people. Something needs to be done quickly.

Offline Eddie

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Re: Subprime Student Loans
« Reply #14 on: April 25, 2019, 05:02:09 PM »
It's not nearly as big a problem as it's made out to be.

I disagree.  Right now, Da Goobermint is only paying a fraction of the total indebtedness.  Most of the loans are still being carried on the books as NPAs. Writing down all that debt is a much bigger deal.

RE
Either way, people like me (that'd be the 56% of Americans who actually pay income tax) will be the ones paying the freight here. Amnesty doesn't change that. The fucking banks should have to eat some of it, but that is not about to happen. The for-profit "schools", mostly scams that don't deliver a useful skill set, should be put out of business.

There are several generalizations being made in the broader debate here that don't stand up to close scrutiny. One is that people who borrow money to go to college are going broke and can't pay. Bullshit. It's mostly not college graduates who are defaulting, and a large percentage of defaulters spent  their educational loans on training in areas that are known to not reliably provide a good living, by those who are handing out the money. Did I say the words conduit scheme?

Almost 1 in 3 people who owe less than $5,000 for their education default within four years, compared with just 15 percent of borrowers who owed more than $35,000, the Urban Institute found.

The issue of default appears to be more concentrated in neighborhoods of color.

https://www.cnbc.com/2018/08/13/twenty-two-percent-of-student-loan-borrowers-fall-into-default.html

We also find that the state’s for-profit higher education institutions are responsible for a disproportionate share of all student loan defaults after five years, with students attending for-profit schools defaulting at more than double the rate of public colleges.

 Although just 6 percent of all undergraduate students in New York attended for-profit schools during the period of our analysis, these schools accounted for 41 percent of all student loan defaults after five years.

https://nycfuture.org/research/for-profit-schools-driving-student-loan-default-in-new-york



There is no doubt that people DO struggle to pay, but that has a lot to do with the fact that the loans are way above market rates and students have no power as consumers to shop for a good rate. It's all rigged. You borrow, you pay too much. It's been like that for a generation.

I still had student debts when I declared bankruptcy twenty odd years ago. But I didn't have to go bankrupt because of student debt. It was actually good for me, looking back, that the student debt was rolled into my Chapter 13, because I had to pay it off much sooner than I otherwise probably would have. (I paid all my creditors in full. In fact, I was never in arrears with any of my creditors other than the US government.)

I think it's interesting that the author used the term "sub-prime", because ALL student loans are high interest rip-offs now......there is no other kind of student loan, although we once had them....we had cheap loans for school at one time. But not since Reagan. Since then it's gotten progressively worse, as the banks lobbied congress successfully to let them legalize usury against people trying to pay for an increasingly expensive education.

Speaking of the sub-prime mortgage  crisis, it's very interesting that banks used EXACTLY the same tactics. You should read about what was called "reverse redlining".

Through a strange kind of logic – the sort that makes sense if you're a large bank at the height of the housing boom – high-income black households were actually the perfect customers for subprime loans. Black communities had long been ignored by banks, creating a void in the market for anyone pedaling these relatively new financial products. And subprime loans, while risky, were tremendously profitable (for the banks) when the homeowners didn't foreclose, thanks to their higher fees and interest rates.

Give a black family that could probably qualify for a prime loan a subprime one instead, and the lender likely wins.

In the wake of the housing crash (and even before), banks have been widely accused of doing just this, and the practice has even become the subject of some damning discrimination lawsuits. But here is some data on exactly how skewed things really were: In 2006, at the height of the boom, black and Hispanic families making more than $200,000 a year were more likely on average to be given a subprime loan than a white family making less than $30,000 a year.

Banks that once ignored minority communities were targeting them now to make money.
"To me, I see that information and I kind of scratch my head," says Jacob Faber, a PhD Candidate in New York University's Department of Sociology who uncovered that gaping disparity studying nationwide mortgage data from that period. One explanation suggests that minority borrowers, particularly those living in communities where bank branches had long refused to go, were simply not financially sophisticated enough to know these loans were wrong for them. "I’m thinking, so for this financial literacy argument to really work, we also have to say that incredibly wealthy blacks and Latinos are less financially savvy than arguably pretty poor white households."

That is probably not the full story here. In research that Faber recently presented at the annual meeting of the American Sociological Association, he analyzed Home Mortgage Disclosure Act data on 3,819,923 loan applications from 2006. About 1.5 million of them were denied. A little over 2 million were approved at a prime rate, and about 200,000 (or 5.4 percent) at a subprime rate.

Relative to comparable white applicants, and controlling for geographic factors, blacks were 2.8 times more likely to be denied for a loan, and Latinos were two times more likely. When they were approved, blacks and Latinos were 2.4 times more likely to receive a subprime loan than white applicants. The higher up the income ladder you compare white applicants and minorities, the wider this subprime disparity grows.

So what was going on here? Intentional malice? Perhaps lenders were convinced that minority borrowers even with high incomes would still pose greater risk over the life of mortgage?

"Certainly we can’t rule out personal bias on behalf of lenders," Faber says. But that's not all of it, either. "There’s a larger part of the story that the financial institutions responsible saw these profitable communities and targeted them specifically because they weren’t risky."

Over the sweep of history, this sounds ironic: Banks that once ignored minority communities were targeting them now to make money, a practice that's been bitterly referred to as "reverse-redlining." But Faber puts it another way: "I think it's tragic," he says. And this data offers another illustration that middle-class blacks have often not been able to leverage their income status for the same benefits as middle-class whites.

Faber was intentionally studying a slice of this mortgage data from the housing peak, when many of these practices were likely at their most pervasive.

"Some people might think that 2006 is a long time ago," he says. "But the consequences of these huge disparities in subprime lending – and then subsequent foreclosures – are going to have really powerful lasting impacts."

Individual families that have lost much of their wealth will struggle to pay for college or manage emergencies. Whole neighborhoods suffering from epidemics of foreclosures will suffer from declining property values and related problems. And even cities that have lost their tax base will struggle to fund schools and police and services. "We might not be able to measure that impact for another five, 10, 20 years," Faber says of this last group of implications. "We might now know what the fallout is."

https://www.citylab.com/equity/2013/08/blacks-really-were-targeted-bogus-loans-during-housing-boom/6559/




« Last Edit: April 25, 2019, 05:05:38 PM by Eddie »
What makes the desert beautiful is that somewhere it hides a well.

 

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