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Soaring Student Debt Prompts Calls for Relief

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Re: Soaring Student Debt Prompts Calls for Relief

#21

Post by dragonwriter »

NickM wrote: post #13
tswartz wrote: post #4

It's such a weight off of the shoulders to have paid my wife and my student loans off a few months ago. Instead of the 20 or 30yr plan we put every extra dollar towards it and paid it off in 3.5 years. It feels fantastic! It's bizarre that student debt has become the norm and students who have potentially low-earning majors such as History are still given similar amounts of money from banks as a CS major.

> It's bizarre that student debt has become the norm and students who have potentially low-earning majors such as History are still given similar amounts of money from banks as a CS major. Not so bizarre when you consider that student loans are very difficult to get discharged via bankruptcy. The loan issuers don't need to worry so much about whether you'll be able to pay it back or not, because it's more a question…

> The loan issuers don't need to worry so much about whether you'll be able to pay it back or not, because it's more a question of "when" than "if".

That wouldn't be true even with the limitations on discharge in bankruptcy, except that servicers have been actively steering people with trouble paying into deferments rather than the various income-based-and-discharged-in-N-years plans (where N is generally 20 or 25.)

Re: Soaring Student Debt Prompts Calls for Relief

#23

Post by tswartz »

ceejayoz wrote: post #16
tswartz wrote: post #9

Earlier quoted context omitted.

Paying off your debt early also builds really good financial habits which will help in the future. You learn to live below your means, make a budget, etc

If they're Federal loans with a often below-inflation interest rate, the actual good financial habit is often to not pay it off, and instead amass a) an emergency fund and b) sock the rest into retirement via an index fund or something similar.

That ignores risk and also financial burden. If you owe $2k every month to NelNet or another institution, it's much harder emotionally and financially to quit your job to travel the world or start your own company. We had Federal Loans and the interest rate was still 6.5%

Re: Soaring Student Debt Prompts Calls for Relief

#25

Post by melling »

jostmey wrote: post #19
NickM wrote: post #13

Earlier quoted context omitted.

> It's bizarre that student debt has become the norm and students who have potentially low-earning majors such as History are still given similar amounts of money from banks as a CS major. Not so bizarre when you consider that student loans are very difficult to get discharged via bankruptcy. The loan issuers don't need to worry so much about whether you'll be able to pay it back or not, because it's more a question…

That's the problem. You add bankruptcy back in and the student loan problem will disappear. Banks will start assessing each person's ability to pay back loans before giving them a lifetime burden of debt. Fix bankruptcy laws, fix the student loan problem.

How do you evaluate an 18 year old on their ability to pay back the loan? You ask them their major, which will probably change?

Re: Soaring Student Debt Prompts Calls for Relief

#27

Post by ng12 »

icehawk219 wrote: post #10

Part of the problem is that the last few generations have been told the same thing: blue collar jobs aren't "good" jobs. You need to go to college so you can get a "good" job sitting at a desk because those other jobs are below you. If you take one of those blue collar jobs then you've failed and aren't "achieving your potential". The grand irony in all of this is that the people who did go on to become plumbers, ele…

I don't even think it goes that far. A lot of young kids go to school because they can. It's autopilot, basically no different than going middle school -> high school. Find a school that'll accept you, pick a major when they tell you to, and don't worry about the loans until after you've graduated.

I saw this first-hand -- I want to a very good school that wasn't _quite_ top-tier. My classes were full of kids who were only there because their parents had decided they should go to college, and then the parents fell in love with the school.

Re: Soaring Student Debt Prompts Calls for Relief

#28

Post by atombath »

NikolaeVarius wrote: post #3

If this happens, do I get benefits on the debt I've already paid off? I would be pretty pissed if I didn't. I worked my ass off to pay my loans.

I understand that feeling... I'm nearing the end of my loans and dropped $3k on one of them yesterday. I would have rather had a vacation if it's just going to vanish!

...but don't get salty because the debt won't vanish. I have no doubt that if an education loan is forgiven, it WILL affect that persons credit rating. Much like when a debt is forgiven/charged-off. Also, charge-offs are typically treated as a form of taxable income... so these people will pay one way or the other, and likely take a long-time credit rating hit.

Re: Soaring Student Debt Prompts Calls for Relief

#29

Post by talmand »

maxerickson wrote: post #18
tswartz wrote: post #15

Earlier quoted context omitted.

Yeah that's a very good point. Interesting how they aren't easily discharged via bankruptcy. I may have to do some research on how exactly that got put in place and who was behind it...

It got put into place because they are high risk loans given out to people that have nothing to secure them with. If you could discharge them in bankruptcy, no one would offer them because huge percentages of people would go ahead and do so.

Especially for young people right out of college who have time to repair the damage to their credit.

Re: Soaring Student Debt Prompts Calls for Relief

#30

Post by maxerickson »

The typical new graduate owes less than $40,000.

The great majority of student debt holders owe less than $30,000.

I'd like to see more direct funding for schools and a shift of federal support to competitive grants, but those aren't huge numbers when you look at a degree bringing in hundreds of thousands of extra dollars over a career.

Grants aren't as egalitarian as giving anyone who wants it a loan, but they can be expected to distort the market less (because schools have to compete for people who don't get them).

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