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Old 03-25-2013, 06:59 AM   #41
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People should have the ability to discharge student debt with bankruptcy, just as they can for everything else. That would fix a whole lot of problems.
Beware of The Law of Unintended Consequences on this. I remember how things were when these loans could be discharged, and I knew more than few folks bragging on how they had no intention of paying the loan back.

I think it makes more sense to have the school be accountable for the loan. If they knew it was in their best interests to have loan paid back they would be more likely to focus on preparing students for viable post college careers relative to earnings.
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Old 03-25-2013, 09:05 AM   #42
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Originally Posted by jollystomper

Beware of The Law of Unintended Consequences on this. I remember how things were when these loans could be discharged, and I knew more than few folks bragging on how they had no intention of paying the loan back.

I think it makes more sense to have the school be accountable for the loan. If they knew it was in their best interests to have loan paid back they would be more likely to focus on preparing students for viable post college careers relative to earnings.
Lending should involve underwriting. As of now, there is no risk to the lender, so there is no underwriting. It's the same situation as in the mortgage crisis, but without the ability to discharge the debt. I think we can all agree on one thing. Whatever our colleges are charging for finance degrees, it's way too much. lol
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Old 03-25-2013, 09:42 AM   #43
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I think it makes more sense to have the school be accountable for the loan. If they knew it was in their best interests to have loan paid back they would be more likely to focus on preparing students for viable post college careers relative to earnings.
We are dealing with adults here, aren't we? I view the institution as a market that offers it's products. If you make bad decisions, why should the institution be at fault? If bad decisions are made and we are dealing with kids, then that's another matter. Mommy and Daddy need to do their job and come to the rescue.
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Old 03-25-2013, 09:55 AM   #44
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People should have the ability to discharge student debt with bankruptcy, just as they can for everything else. That would fix a whole lot of problems.
I was just thinking the same thing--that would make conventional lenders much harder on borrowers for these uncollateralized loans if they knew the borrowers could walk away from them. If loans were harder to get, colleges might address their costs a little more closely if they had to act as the lender and then hold the loans.

I do think anyone who wants a college education should be encouraged and advised of all their options. And those who don't right out of high school also need some guidance about what lies ahead. Fortunately neither attending college or taking another path is mandatory, but I love that in the US we don't have to be bound by our past or our parents' past.
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Old 03-25-2013, 10:34 AM   #45
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We are dealing with adults here, aren't we? I view the institution as a market that offers it's products. If you make bad decisions, why should the institution be at fault? If bad decisions are made and we are dealing with kids, then that's another matter. Mommy and Daddy need to do their job and come to the rescue.
I agree that those in the finance industry are not professionals and as such do not have a fiduciary relationship with their clients. That's why bankruptcy should be an option. To mediate improper, unethical behavior by lenders.
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Old 03-25-2013, 10:59 AM   #46
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I was just thinking the same thing--that would make conventional lenders much harder on borrowers for these uncollateralized loans if they knew the borrowers could walk away from them. If loans were harder to get, colleges might address their costs a little more closely if they had to act as the lender and then hold the loans.
You do realize that most student loans (93%) are from the government these days?

See chart in Federal Lending Push Swells Student Debt - WSJ.com
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Old 03-25-2013, 11:12 AM   #47
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We are dealing with adults here, aren't we? I view the institution as a market that offers it's products. If you make bad decisions, why should the institution be at fault? If bad decisions are made and we are dealing with kids, then that's another matter. Mommy and Daddy need to do their job and come to the rescue.
Keep in the mind that institution has a vested interest in keeping folks to "chase the dream". If you have ever gone on a college visit with your children, or attended a college information session, straight talk regarding debt, majors, and post college realities are in short supply. I have yet to hear in anything words like "if you need to take out more than $xxx in loans, choose your major wisely or you might not earn enough to pay it back - and that will impact your financial situation forever".
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Old 03-25-2013, 11:33 AM   #48
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You do realize that most student loans (93%) are from the government these days?

See chart in Federal Lending Push Swells Student Debt - WSJ.com
Either way, let the borrowers walk away and the lending programs will change (your link is subscription only, by the way).
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Old 03-25-2013, 11:41 AM   #49
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Keep in the mind that institution has a vested interest in keeping folks to "chase the dream". If you have ever gone on a college visit with your children, or attended a college information session, straight talk regarding debt, majors, and post college realities are in short supply. I have yet to hear in anything words like "if you need to take out more than $xxx in loans, choose your major wisely or you might not earn enough to pay it back - and that will impact your financial situation forever".
Yes, That's a good point. That's exactly what is happening. You have the two sides...like the college being the car dealer and the student being the car buyer. The dealer has the angles figured out, since it's all about money. The buyer needs to know what a good deal really is before buying...
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Old 03-25-2013, 11:50 AM   #50
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You do realize that most student loans (93%) are from the government these days?

See chart in Federal Lending Push Swells Student Debt - WSJ.com
Which makes it worse.... in the article they said there is no credit standards or underwriting....

The below in the article is a perfect example of WHY some people should not get loans... and having some kind of standard would have prevented this... my bold...

"Joanne Smith, 53, of Port Richey, Fla., had filed for bankruptcy three times and was unemployed in 2004 when she started borrowing through the government's Parent Plus program, which enables parents to borrow for their children's tuition. Her mother co-signed the loan, which helped cover her son Tim's education at Embry-Riddle Aeronautical University in Daytona Beach. He graduated in 2010 with a degree in engineering physics. Ms. Smith, who is disabled and unemployed, now owes $184,500 on student loans. Her son owes roughly $45,000.



Ms. Smith said the government allowed her to postpone repaying the loans until this summer, and she is now two months behind. She said the $1,985 monthly tab exceeds the roughly $1,600 a month she receives in disability income. "All I could think about was I got to get my son into college," she said."
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Old 03-25-2013, 12:52 PM   #51
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(your link is subscription only, by the way).
My apologies. I found the article via google, which provides a working link, while I grabbed the link posted directly from the page. Here's the google link:

http://www.google.com/url?sa=t&rct=j...RlFkn0pZz9fhRQ
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Old 03-25-2013, 02:49 PM   #52
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People should have the ability to discharge student debt with bankruptcy, just as they can for everything else. That would fix a whole lot of problems.
I would think that the economics of supply and demand would apply both ways. The current law that prohibits students from discharging their loans by bankruptcy should provide an incentive for students to think hard about taking out a loan in the first place and for making wise decisions about what to study if they do take out a loan. Educational institutions should not be giving out false or misleading information about their programs and the future prospects of their graduates. I can see some regulation in that area. However, these days, there is more than enough information available for students and parents to evaluate the value of a loan vs the education being sought.

On the other hand, if students could declare bankruptcy, then banks would have to decide whether to give out risky loans and under what terms. That could be fair too but then we would probably see loans dry up (which could be a good thing) and we would see banks making the decisions about which fields of study are worth the risk of a loan.

Personally, I don't think banks should be making the decisions about which courses of study are worthwhile. It is hardly their area of expertise.
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Old 03-25-2013, 03:01 PM   #53
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Personally, I don't think banks should be making the decisions about which courses of study are worthwhile. It is hardly their area of expertise.
As I pointed out above, banks have very little to do with it. Student loans are primarily coming from the government today.

There is no loan market involved, just government policy.
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Old 03-25-2013, 03:20 PM   #54
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I would think that the economics of supply and demand would apply both ways. The current law that prohibits students from discharging their loans by bankruptcy should provide an incentive for students to think hard about taking out a loan in the first place and for making wise decisions about what to study if they do take out a loan. Educational institutions should not be giving out false or misleading information about their programs and the future prospects of their graduates. I can see some regulation in that area. However, these days, there is more than enough information available for students and parents to evaluate the value of a loan vs the education being sought.

On the other hand, if students could declare bankruptcy, then banks would have to decide whether to give out risky loans and under what terms. That could be fair too but then we would probably see loans dry up (which could be a good thing) and we would see banks making the decisions about which fields of study are worth the risk of a loan.

Personally, I don't think banks should be making the decisions about which courses of study are worthwhile. It is hardly their area of expertise.
On your first part... there seems to be ample evidence that your thinking is not correct.... that is why there seems to be this huge student loan problem that was not a problem many years ago...

To your last stmt, I agree... but their area of expertise is underwriting loans... IOW, with the example in my last post any bank officer would never have lent so much to someone without ANY ability to pay... it does not matter what job etc. the son has as from what it seems to me is that the mom is on the hook...
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Old 03-25-2013, 07:10 PM   #55
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Usually by the time a high school student is looking around at colleges he or she has been subjected to many years of unrealistic, pie in the sky direct and indirect selling from teachers, other students, and guidance counselors. She has been living on her parents' dime, often with zero adult responsibilities or opportunity to find out how the world really works. This is even more likely today, when it is so hard for young people to get jobs where they would get exposure to the real world. If they volunteer at something, too often it is to polish a resume, with the sole purpose of getting into a better college. If she and her boyfriend go to a movie, they get more propaganda about how all the cool kids are going off to Princeton or Vassar, and the losers are going to be stuck in some dead end job.
She will never see a movie about what a dent in her lifestyle will be made by $100,000 in student loans, when she is an entry level banker and is forced to come back to Mom and Dad's home to survive, where Dad's rules may not be welcome but what can she do?

My parents rented apartments to students and young working people, and I remember one night in the early 60s, sitting in the garden with a couple of these girls. I asked the cuter one whät she was studying, and she answered "Implied Arts". It's been years, and I cannot remember her name, but I sure remember her course of study. She was on her way home by the end of her first semester

I hold the parents responsible, not because they caused this mess, but because they are the only experienced actors who stand to lose right along with the student when the pinch comes. They are the ones who love their daughter, and really know her.
I think we have a nation of infantile morons making decisions that used to be made by adults.

A kid should go to college on her own dime and her own borrowing, or with very clear, unambiguous limits-like you can live at home and go to local state university, or get a full ride scholarship, or get accepted into a self sustaining co-op program, etc. Only then will she ask herself, do I really know what this will get me, and will what I can from it get allow me to have a reasonably enjoyable life pretty quickly, as well as to retire the debt?

It's the decision any young person has to make when he or she attempts to buy a business, or buy tools to start an apprenticeship, or any other reasonable start to a free living, independent adult life.

Too many of our colleges and universities seem to think that their clients are like 19th century swells who went to Oxbridge to "read classics" or some such. Except those 19th century students usually did do some serious work, whereas the typical American liberal arts college teaches very little.
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Old 03-25-2013, 07:40 PM   #56
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On your first part... there seems to be ample evidence that your thinking is not correct.... that is why there seems to be this huge student loan problem that was not a problem many years ago...
I agree that it hasn't worked as it should. I'm just pointing out that returning to the days when students could declare bankruptcy didn't and probably wouldn't work either. Something more complicated and/or irrational is going on.
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Old 03-25-2013, 07:43 PM   #57
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There is no loan market involved, just government policy.
I don't think most people would be comfortable with the government making these value decisions either. Or from another point of view it would be politically impossible to make those decisions.

The Government role could be to collect and collate the data in a way that everyone in the process could make a more informed decision.
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Old 03-25-2013, 08:01 PM   #58
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This might seem to imply that people who don't want higher education aren't motivated.
Sorry about that. I didn't mean to imply that a BS or BA was the only path for motivated people. There are tons of other ways, and many of them would rocket the person to the top, beyond the degree seekers.
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Old 03-25-2013, 08:11 PM   #59
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UF, by the way, is a hick school in a hick town in a hick state. It's embarrassing what they charge for their " education."
What would your mom say about that comment? Back in the day, people here were at least passive-agressive, hehe. I only mentioned my hick school because I thought the "Gator" in your ID had something to do with UF.

My comment was an attempt at humor. Sorry if it got under your skin.
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Old 03-25-2013, 08:19 PM   #60
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I think the logic works like this. There is an excess demand on college ergo college prices rise. This in turn should reduce demand on college due to market forces. But student loans allows people pay above their means for college. What will make sure such loans will be productive is the entities that make the loan since there is always the risk of default. But if student loans cannot be removed via default, then entities that make the student loans will continue to make these loans despite the risk of default since the changes of eventual repayment is higher. So fixing this will eventually fix the excess demand for college and bring college costs into line with market forces.
How about these market forces: Students pick a major that has low prospects of monitary success in the future and figure, what the heck, if doesn't work out, at least it won't cost me a dime. In some ways, it might be cool; you could get students "swinging for the fences"! Might benefit society to have less pressure on pushing students to the "safe options". But it's not free, of course. The other students that did pay would simply have higher costs on their loans or the taxpayers would pick up the tab.
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