College Loan Forgiveness

@CoastalRat,

I have college age kids and know lots of college age kids through mine. My thoughts:

- Colleges are radically different in price, not so much in education value. Private schools that charge in excess of $50k/year are not significantly different in value from a state school that charges $15k/yr. There are a few exceptions, very expensive schools where there are opportunities that you just can't find at most colleges, but they are the exceptions.
- State schools are already government subsidized. This has been a huge engine for growth in the US and often represents a great opportunity for minorities and the poor, but states are pulling back under financial and ideological pressure.
- Colleges are competing with one another, providing more amenities, etc but this is driving up costs. Luxury dorms, high end football programs, fancy food options are not necessary for a good college experience.

Rather than forgive college loans, I would support increasing government support for public colleges. Say an additional $10k/year/student. In my state, the high end public colleges (UNC, NC State) charge $20k/year all in to in state students. The second tier (also very good colleges) charge around $15k/year and the next tier down (respectable schools all but more commuter schools with smaller degree programs) are less depending on if you need housing, etc. Since money is fungible, the federal government would have to work with states to make sure the states just didn't cut back on their commitment if the federal government started contributing. Something like a federal dollar for every two state dollars might work.

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@CoastalRat,

I believe that at minimum all student loans from public universities and colleges should be forgiven. That these third party (for-profit) student loan management corporations should basically be given the boot and they are the biggest problem with the national student loan crisis.

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@tsarstepan,

I get that these third party loan management corporations may be a big problem. But I keep going back to the fact that nobody held a gun to someone's head and made them sign for a student loan. I find it difficult to get past the whole personal responsibility issue.

Now, if you want to talk about a law capping the interest rates on student loans to something like prime plus 1%, I would be all for doing so. I think that would help fix some of the issues that you refer to.

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@CoastalRat,

CoastalRat wrote:

I get that these third party loan management corporations may be a big problem.

You really don't understand how student loans work. Many people DON'T TAKE OUT LOANS with these third party management systems like Navient. I got my loans through Sallie Mae (the government entity that gives out loans). These third party corps come in a buy up the loans and then they run the student on an infinite treadmill. I went to a public school in Massachusetts (over 20 years ago) and I'm still paying off the interest of my loans (@$12000).

Quote:

the fact that nobody held a gun to someone's head and made them sign for a student loan

That's insanely tone deaf. I know your generation doesn't see things particularly clearly but the thing is Bachelors degrees are the new high school diploma. You have to have at least a Masters degree to enter the middle class realm. Since I don't have a Masters degree, I'm pretty much screwed.

Quote:

Now, if you want to talk about a law capping the interest rates on student loans to something like prime plus 1%, I would be all for doing so. I think that would help fix some of the issues that you refer to.

In what world will this help anyone? What issues do you think I'm referring to?

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@CoastalRat,

Before we go further, I highly recommend this book to anyone with high school students trying to navigate the college selection experience. There is a lot of hype out there and this book is a fairly humorous explanation of all of it.

https://images-na.ssl-images-amazon.com/images/I/51CVufFg6-L._SX329_BO1,204,203,200_.jpg

A couple of stories that shape my views.

- My niece wanted to go to Big State U where she was accepted. Her mother was supportive, her father wanted her to go to the local commuter college which was cheaper and he was not willing to pay Big State U tuition. My niece chose BSU anyway, got a small, off campus apartment for cheap and a full time job. It just about killed her trying to hold down the school work and the job. She started having seizures from the stress. At that point, a very (very, very) rich uncle on her mother's side stepped in and offered to pay her housing as long as she was in school. I figure it cost him around $5k/year. That dramatically changed her life. Without the financial stress, the medical problems dissipated and she went on to graduate on time. I took two things away from this. First, that local commuter college would have been a good option. The degree would not have had the prestige of BSU and she would have been under her parents' thumbs so she would have not learned some of those social lessons that come from "going off to college", but the money would have worked and the degree would have been solid. Second, that a relatively small investment can make a huge impact in a student's life. $5k/year really did completely change my niece's life. It was like turning on a light switch. Honestly, I could have helped her to that extent and I didn't even think about it. Sometimes we worry more about "fairness" than "the common good". There are a lot of first graders who are glad to have a new teacher and that's a win for society.

- A friend of my son worked really hard in high school and decided she wanted to go to a small, fairly exclusive private school. Her father the doctor was skeptical, but in the end supported her. She wandered around academically, ended up graduating with a degree in a field she wasn't interested in and is going back to school to get a degree in a completely different field. I love this kid (ok, young woman now but I've known her since she was three months old) but no way that investment was worth it. She grew a lot in those four years, found what she really wanted to do, but she could have grown a lot for $60K at the college my son went to instead of the quarter million she spent.

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@tsarstepan,

I totally understand about the third party corporations coming in and buying the loans. And I think I agreed that they are a big part of the problem. But let me ask you a question. I'm serious here because I really want to understand your viewpoint. It has been a long time since I had a student loan. But when the loan is purchased, aren't the terms of the loan still the same as when you signed your name to it? In regards to the interest rate I mean. And doesn't the interest not begin accruing until some set time after you leave school? I would think that regardless of who holds the loan, the terms cannot be modified.

Quote:

I know your generation doesn't see things particularly clearly but the thing is Bachelors degrees are the new high school diploma.

This is irrelevant to the issue really. Unless you are going to argue that states should pay for one's college education just like they do for a high school education. And that is a different discussion that you might be surprised on my viewpoint.

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@engineer,

The second of your true stories is one reason why I have a problem with forgiving student debt. Too many kids go off to college now without a real motivation to learn but simply because they feel they should go to college. If they know their student debt will be forgiven, well, how many more will go simply to get away from home. Have fun for a few years, do the whole college experiment, go to football games and then leave school and know their debt will be forgiven.

My brother was that way but fortunately got smart after one year of partying, middling grades and not too much debt. He left school and was way better off for it.

I freely admit that my problem with this is more a matter of my belief in being personally responsible for living up to agreements one makes.

1 Reply

@CoastalRat,

I pretty much agree with you. That's why I'd rather lower the bar at the low end than try to make a blanket forgiveness regardless of the amount.

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@CoastalRat,

CoastalRat wrote:

I am currently discussing with someone about whether the government should forgive/pay off all or a portion of student loan debt. She and her husband (they have 2 daughters who have a good bit of college debt) are full in on government "forgiving" college debt since this will, among other things, stimulate the economy (and of course mean that their daughters do not need to repay their debt.) I am curious what others think, particularly if they have no bias due to having kids with debt.

So what do my colleagues here on A2K think?

Well I am biased as my daughter is in college and has taken some student loans.

So you would think that I would be all for this --- I am not. It completely sends the wrong message. These are young adults in which knowingly borrowed money which means you are obligated to pay it back! Forgiven it says nah you don't need to be responsible we will give you a free ride.

If these students think the loans are too high to pay back then they should not take them out. Go part time - or delay going a year or so and save some money.

What message does this also say to those that were responsible and paid them back ahead of time. Damn I should I have been irresponsible and let the government pay them?

To b honest this proposal is simply not fair and will encourage future generations to be even more fiscally irresponsible.

1 Reply

@CoastalRat,

CoastalRat wrote:

I totally understand about the third party corporations coming in and buying the loans. And I think I agreed that they are a big part of the problem. But let me ask you a question. I'm serious here because I really want to understand your viewpoint. It has been a long time since I had a student loan. But when the loan is purchased, aren't the terms of the loan still the same as when you signed your name to it? In regards to the interest rate I mean. And doesn't the interest not begin accruing until some set time after you leave school? I would think that regardless of who holds the loan, the terms cannot be modified.

Quote:
I know your generation doesn't see things particularly clearly but the thing is Bachelors degrees are the new high school diploma.
This is irrelevant to the issue really. Unless you are going to argue that states should pay for one's college education just like they do for a high school education. And that is a different discussion that you might be surprised on my viewpoint.

Yes you are correct coastal rat - I am going through this now. And to top it off students are required to take online training to get a loan (at least through the government/school) - it details out clearly that this is loan and you need to repay it when you graduation.

If the loans are re-sold - the terms of the loan do not change. The only change you see is who you pay. Think of your mortgage - it is no different. I have had my mortgage sold to another company - I still do not pay a different interest rate.

These are supposed to be young adults - they want all the benefits of being an adult when they go off to college why wouldn't they take on the responsibilities as well?

1 Reply

@CoastalRat,

CoastalRat wrote:

But when the loan is purchased, aren't the terms of the loan still the same as when you signed your name to it? In regards to the interest rate I mean. And doesn't the interest not begin accruing until some set time after you leave school? I would think that regardless of who holds the loan, the terms cannot be modified.

Dear lord the conditions have changed too many times. They change with every change of the loan owner's set of hands. I don't think you understand how flexible (towards the bank the legalese is written). The terms cannot be modified? That seems quaint.

Quote:

Quote:
I know your generation doesn't see things particularly clearly but the thing is Bachelors degrees are the new high school diploma.
This is irrelevant to the issue really. Unless you are going to argue that states should pay for one's college education just like they do for a high school education. And that is a different discussion that you might be surprised on my viewpoint.

Too many people are drowning from preexisting loans. I know some people (in the Baby Boomer generation) getting their degrees from a cracker jack box (if they so inclined to get a degree in the first place and still get a professional - not trade based occupation) and the companies they go make a lifetime career at ... don't give a damn but that's not possible these days.

My ironic situation is I've attended two PUBLIC colleges in my life. My student loans come from my first (failing) attempt at college. I didn't get a degree from this college.

My second attempt? Here in NYC, I got my four year degree (mostly paid in terms of two grants... one being the very famous Pell Grant... can't remember the name of the other). I'm definitely not an outlier in this department. Making public universities and colleges tuition (and beyond) free isn't going to help the literal thousands (and more) who pay their student loans on a timely basis but ... you know... choose to not be homeless or go into starvation mode to pay off loans that have morphed into legalized highway robbery/loan sharkery.

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And another item with the high cost of college - my daughter ended up going to a small private EXPENSIVE college. Why - net it was cheaper than the public colleges. She received significantly more academic and talent scholarships from the private school than from the public (the public scholarship was a joke) - so it was less money for her to go to the academically better school than the public in the honors program.

Yes she had to take out loans but we have limited the amount - we have advised her on her job selection to consider when she graduates so she will be in a position to pay off these loans. Does she want to go get a job where she will be paid significantly less - yes that is her preferred job, but we discussed with her living at home afterwards getting a higher paid job for a couple of years while getting her certificate or masters which will put her in a position to get her dream job that also supplies her with enough money to pay loans and support herself.

So the government (meaning all us US citizens) needs to foot the bill for these loans - because the schools already got their money - because these young adults made bad decisions or bad choices?

I agree that we should work to make colleges more affordable but we should not forgive loans that young adults took out willingly.

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@tsarstepan,

It is likely you did not fully read the terms of your loan - did you take out an adjustable rate loan? Did the terms state that certain items could change?

It is your responsibility to read the terms of the loan agreement so you understand what is able to change and what is not. It is called being a responsible adult. If you do not understand the terms of the agreement then you do not sign.

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@Linkat,

Linkat wrote:

If the loans are re-sold - the terms of the loan do not change. The only change you see is who you pay. Think of your mortgage - it is no different. I have had my mortgage sold to another company - I still do not pay a different interest rate.

Bull!
Your student loan company just changed the terms of your agreement. What do you do next?

And

Quote:

But a month later, you log into your account only to find that those additional payments made no difference toward your principal balance.

What gives? It turns out that the company handling your loans actually lowered the next month’s amount due — without telling you — and extended your repayment period, applying the extra money you sent in toward future payments instead of paying down the principal immediately.

Quote:

Servicers can reset loan repayment schedules and cause a borrower’s monthly payment to rise or fall, a practice known as redisclosure of repayment terms. This can happen when loans are transferred from one servicer to another, or when the company makes changes to its computer systems. More than 10 million student loan borrowers have had their accounts moved from one company to another since 2013, according to the CFPB.

That literally is an another type of example of changing loan terms.
If you pay more than the amount due on your student loans, you might be in for a surprise

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@tsarstepan,

Exactly you proved my point - they are not supposed to changes these legally - so what do you do you next - well read the article.

I can post as many or more links than you that show that legally when your student loan is sold - the terms of the loan do NOT change.

If this is happens to you - you need to take the correct actions. Not that it is right, but illegal things happen to adults all the time - this is why you speak up for yourself and you fight it. It is part of being an adult.

It does not mean you should not be responsible and pay for what you owe - for what you willingly signed that you would pay back. This has nothing to do with forgiving loans - it has to do with a company engaging in illegal activities.

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@Linkat,

Linkat wrote:

Exactly you proved my point - they are not supposed to changes these legally - so what do you do you next - well read the article.

You are really naïve to believe that the CFPB has any teeth. That agency has basically been neutered.

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@tsarstepan,

Ok they do the same thing on the car loan - if I pay more than I owe - they lower my next month's bill. I don't cry and say oh they changed the terms - they did not change the terms of the loan. I still owe less in principal of the loan? Do you know read your loan statements?

Are you that dumb that you didn't notice the next month's bill is lower? I simply pay the same amount as I was previously or a larger amount to continue paying off my principal. If I do so I will have paid less in interest and paid my loan off sooner.

I would have thought that you might have called the loan company if you had a question on why your next month's bill was lower at the very least.

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@CoastalRat,

PRE-EDIT DISCLOSURE - I wrote the following while tsar and linkat where discussing the same....it changes nothing what I've said though.

Very curious as to the response coastalrat gets to this last post/question.

I am in complete agreement btw, of leaving out the "you old farts just don't understand....college degree is new high school diploma, etc. It's a knee jerk reaction, and isn't addressing the stated question.

Let's keep this to the question at hand for now at least, rather than throwing various strands of spaghetti at the wall.

He asked a finance question, pure and simple.

********

The point about 3rd parties taking over a student loan is irrelevant. It's like a mortgage loan. In the years I paid on my house, the mortgage debt was sold at least 5 times to different banks. That didn't change my interest rate, term, or anything.

Please educate me if this is not the same with a student loan. When the debt is transferred, is your rate jacked up or something? Is that what you agreed to initially, knowing it would be sold to someone else?

Another question I have wondered about is whether or not, as with your mortgage, credit card, car loans or many other debts, if you can make prepayments on the principal.

If you can, even the smallest extra amount sent will make a big difference, especially at the begining of the loan.

And to eliminate the "you don't understand again, you're so out of touch" I personally think many people, regardless of age, totally underestimate the power of a single dollar plus coins, foregoing even a small thing, like a beverage other than tap water at a restaurant meal, etc. etc.

At the end of this post, I supplied a link that automatically calculates what would happen to the length of a loan (it says mortgage, but again, doesn't matter) if you were able to scrap coins out of the sofa cushions, forego one meal out, walking instead of uber, leaving a function before ordering another drink, going to one less movie, on and on, per month.
For this example I picked $23 a month (76 cents a day) that is a person could somehow manage put put aside, they would shave an entire year off the end of their loan. That is, if you started doing it at the start of the loan.

Perhaps to someone at the front of the student debt, this sounds so childish (or should I say senile) and stupid. But honestly, it's the way numbers work. If in addition, every time you get a raise, get some random money, find a quarter on the street....that's where it goes. How do you think I paid off a 30 year mortgage in 15 years? I literally every day, put 50 cents into my Star Trek Next generation lunch box, increasing it to a buck a day, then $10 every Friday, then added in half of every raise I got, then collected that money every 6 months and sent it to the principal. I personally would not send in extra every month. Too much room for error on their part. Then, follow up, follow up, follow up.

I know, I know, this sounds sofa king ridiculous, idiotic, provencial, etc.

But I'm not in any debt, and when I had debt for mortgage, big renovations, which in itself added up to many people student debt.

Oh....even if they did apply (which you of course would correct because, as linkat said, you obviously wouldn't be so dumb to not notice the change) kinda so what? They apply it to future payments, the payment goes down, you keep sending the same amount, plus your extra money, the amount goes down more, eventually, if you keep this up, the amount goes to zero...earlier.

A few times when I sent extra principal they would put it toward the future payment, I would immediately notice and have them correct. Ya gotta keep up with it. I remember once the person on the line telling me they don't do that.....yes, you do, and they did.

https://www.bankrate.com/calculators/home-equity/additional-mortgage-payment-calculator.aspx<br />

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tsar, save your "how quaint" stuff to answer this specific question please.

When the lender sells your loan to someone else, can they, or can they not change the interest rate? If they can, how much can it go up percentage wise.

Comments like "how quaint" bring up the thought of "how dense" in my mind.

It almost (well more than almost) seems that so many people don't understand how loans work.

I didn't even need a college course to figure that out.

So they change the payment date, so they change the amount to be paid each month. If a person keep dumping extra into the loan, it'll shorten the length of the loan.

Again, please stop with the "you baby boomers, so cute and oblivious. Here dear, let me wrap that blanket around you". If you do, maybe us senile ood crones won't start with "give up a bubble tea once in a while, or that dish of ice cream, or god forbid, a movie."

Believe it or not, the majority of people past a certain age are well aware it is financially more difficult for people under a certain age. We totally, absolutely get that. We understand about loans, that they can be sold, payment dates can change, etc etc.

So far, what I have gotten out of your comments is basically that you're screwed because they sell the loans (duh), and change payment dates. So that apparantly means it's impossible to check monthly to see what the new date is? Send extra money on an regular basis to principal?

1 Reply

College Loan Forgiveness

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