Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

White House rolls back protections for people in default on student loans

washingtonpost.com

Post reply on HN
Print view View original

141–150 of 164 posts

Re: White House rolls back protections for people in default on student loans

#141

Post by DrScump »

dkrich wrote: post #62
UpDownLeftRight wrote: post #24

There's a trillion dollars of liability we're talking about. I'm OK with some forgiveness, but if and only if the Government gets out of the student loan business. (Watch tuition drop like a rock if this happens!)

And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy. Essentially move the 100% of the risk that borrowers currently have and move a nice portion of it to the lenders so they both bear the burden of the loans can't be repaid. Imagine if banks had zero risk when providing home loans. I don't think it would be too difficult to buy a house you couldn't afford and…

  And if guarantees for the loan companies are removed and the inability to free yourself from it in bankruptcy.
Then why would the loan companies do student loans at all except at exorbitant rates (thereby making the responsible students pay more for those who aren't excluded altogether)?

Re: White House rolls back protections for people in default on student loans

#142

Post by shiven »

hermitdev wrote: post #134
shiven wrote: post #113

Earlier quoted context omitted.

If they don't suffer the consequences of buying a useless degree, why wouldn't they keep doing it? Why shouldn't the lender also assume part of this risk? Why is their recoupment guaranteed (student loans can't be dissolved in bankruptcy)? Why are they always likely to be bailed out (prove me wrong by showing a student loan lender that went into bankruptcy)? Lenders need to do more due diligence and stop lending to s…

The lender actually assumes most of the risk. In the case of a default, there's not generally much or any assets for them to go after to liquidate.

I don't think that is true. You can temporarily avoid repaying the loan, but you can never be absolved of it via a bankruptcy declaration (whereas most other loans will effectively disappear). Student loans are repayable as long as you are alive, you can only get a temporary pause in repayment, at most. Hence, the lender is guaranteed repayment as long as the borrower or consigners are alive.

Re: White House rolls back protections for people in default on student loans

#143

Post by masonic »

Two things to note on this:

1) the Obama policy (not even official administrative rule with any weight of enforcement, just a memo with a veiled threat of negative attention if flouted with any frequency) was only in place for his last 1.5 years. This letter just pulls that back to the first 6.5 years of his reign.

2) Note this quote: "The withdrawal of the Obama administration memo arrives the same week as a report from the Consumer Federation of America (CFA) showing that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier. "

In other words, after this rule was put in place, millions of loan recipients stopped making any payment altogether and 14% more entered default despite added mechanisms for avoiding default.

This article doesn't even go into the huge taxpayer bailout of students of closed and failing for-profit diploma mills[0]. It was an unprecedented windfall for those affected, the entire debt was forgiven, they took no hit on their credit, and the debt forgiveness wasn't counted as income by the IRS (like debt forgiveness normally works). Taxpayers paid for it all. It was a great buy-off of new voters.

An obvious small mitigation would have been to instead have their debt applied against a replacement degree program (e.g. you owe $20,000, you go to a new school at $10,000 tuition per year, then your first two years' tuition payments wipe out that debt, with interest charges stopped while in school).

[0] https://www.usnews.com/education/blogs/student-loan-ranger/2...

[EDIT]: Here is the original Obama FFEL memo:

https://ifap.ed.gov/dpcletters/attachments/GEN1513.pdf

Re: White House rolls back protections for people in default on student loans

#144

Post by scarface74 »

nhangen wrote: post #10

I'm surprised by the comments here. I am a fiscal conservative, but having taken and struggled to pay for student loans, and having hired people in the same situation, find that the lending programs are predatory by nature in that they know students will be unable to service the high monthly payments, and eventually default as a result. Do I think people should pay their debt? Yes, but these lenders are the same lend…

I have a hard time feeling any sympathy for students racking up tens of thousands of dollars worth of debt to go to a "good school" to get a degree in a field that doesn't pay enough to make it a worthwhile investment.

I went to an unknown state college and paid less for my four year CS degree than many of my coworkers paid for 1 year and within 3 years of graduating, I had no debt, and was making just as much as people sitting beside me who went to more "prestigious" schools.

I had former classmates that thought they were too good to go to the local state college,racked up thousands in debt to be a teacher or a social worker. Why?

Re: White House rolls back protections for people in default on student loans

#145

Post by scarface74 »

kartan wrote: post #101
rm_-rf_slash wrote: post #94

Earlier quoted context omitted.

The deeper problem is that we link education with employment and leave it at that. Vocational and apprenticeship programs are excellent ways for people to learn useful skills while remaining gainfully employed.

> Vocational and apprenticeship programs are excellent ways for people to learn useful skills while remaining gainfully employed. And the other way around is also true. There is value in people educated on arts or science even if they don't get a job directly related to it. You are right that the link education-employment is in fact is wrong, I will say it is quite elitist. It presumes that people in jobs that don't…

There might be a "value" in it but why shouldn't they pay for it?

Re: White House rolls back protections for people in default on student loans

#146

Post by x0x0 »

dragonwriter wrote: post #137
x0x0 wrote: post #126

Earlier quoted context omitted.

No, they're functionally impossible to discharge in bankruptcy.

http://abovethelaw.com/2016/01/the-tetzlaff-aftermath-discha...

Did you even read your link?

   uliano’s study is worth reading. He reviewed every bankruptcy case involving 
   student loans in 2007. He found that of the 169,774 student loan debtors 
   filing bankruptcy, only 213 filed adversary proceedings, a necessary step to 
   discharge student loans. And of that 213, 51 received full discharges, 30 
   received partial discharges and 25 received an administrative remedy. In 
   other words, 0.1% of bankruptcy filers even tried to discharge their student 
   loans. And of those who tried, 50% of them received some kind of relief from 
   the court and 25% received a full discharge of their student loans.
So either the who-knows-how-many attorneys involved in 169,774 - 213 = 169,561 bankruptcy cases (99.87% of such cases) involving student loans are incompetent, or ... student loans are functionally impossible to discharge in bankruptcy.

Re: White House rolls back protections for people in default on student loans

#147

Post by scarface74 »

hermitdev wrote: post #135
thecpphorse wrote: post #90

Earlier quoted context omitted.

Why should lenders not be punished for financing the useless degree? After all the availability of easy financing drives up the price of the useless education. Remember, the "moral hazard" spoken of in financial bailouts is that the lenders aren't being punished for taking bad risks.

Much like the housing collapse, banks have been mandated to finance to people that can't afford it for student loans. The blame doesn't solely lay with the banks. The government is at least equally to blame.

That banks were "mandated" to finance people who couldn't afford housing is nothing more than a conservative talking point. The risky loans that banks took on -- no doc loans, interest only loans, negative amortization loans, sub prime high interest loans -- were "non conforming". "Non conforming loans" by definition were not government backed loans.

People who were taking advantage of those loans generally fell into a few categories. Investors who were buying real estate to flip. People who were getting houses appraised at more than they were worth and were illegally getting cash out and people with money that were buying over priced houses to live in but to sell later.

Re: White House rolls back protections for people in default on student loans

#148

Post by scarface74 »

eli_gottlieb wrote: post #119
Kluny wrote: post #44

Earlier quoted context omitted.

That would be a great idea. Universities won't do this unless they're legally required to. Student ignorance drives their business model.

They're universities. They don't have a business model. They're not businesses. Their job is to teach and to research, not to make a profit.

That's not true. There are a lot of private universities and so called "non profit" universities where a lot of people are making money. Even public universities will do what it takes to stay open - including denying state residents admissions in favor of foreigners who pay full price.

Re: White House rolls back protections for people in default on student loans

#149

Post by scarface74 »

enraged_camel wrote: post #107
UpDownLeftRight wrote: post #39

Earlier quoted context omitted.

I don't pay student loans. Do you know why? I don't have them. I went to an inexpensive local school, worked while going to school, and took the public bus to and from it. (I was fortunate enough to be able to live with my parents.) While I don't know your situation, it's hard for me to feel sorry for someone who went to an expensive private school, lived on campus in a "country club" atmosphere, and then expects the…

>>I was fortunate enough to be able to live with my parents. Um, you added this as an afterthought, but it's by far the biggest expense. We're talking probably around $500 per month on average (if you live with others) plus utilities, not to mention food. So you were able to save around $1000 per month living with parents - and that's a conservative estimate. Many people aren't so fortunate.

And many people are but decide they want the "freedom" of being out of their parents house and the local cheap college is g good enough for them.

Re: White House rolls back protections for people in default on student loans

#150

Post by cam_l »

scarface74 wrote: post #144
nhangen wrote: post #10

I'm surprised by the comments here. I am a fiscal conservative, but having taken and struggled to pay for student loans, and having hired people in the same situation, find that the lending programs are predatory by nature in that they know students will be unable to service the high monthly payments, and eventually default as a result. Do I think people should pay their debt? Yes, but these lenders are the same lend…

I have a hard time feeling any sympathy for students racking up tens of thousands of dollars worth of debt to go to a "good school" to get a degree in a field that doesn't pay enough to make it a worthwhile investment. I went to an unknown state college and paid less for my four year CS degree than many of my coworkers paid for 1 year and within 3 years of graduating, I had no debt, and was making just as much as peo…

Removing the debt protections for the industry (ie. allowing students to default) would be the surest way to limit the proclivity of institutions to offer bad investments to students.
Post reply on HN