Student debt the next financial time bomb

[Savoir Faire-Demogague in NJ]

Hey Mods, I think this is my second new thread...I forget...do what ever you need to do....SF

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www.usatoday.com/money/perfi/college/story/2012-02-08/student-debt-looming-economic-bomb/53010440/1

Bankruptcy lawyers: Student debt is looming economic bomb

ROCHESTER, N.Y. – Student debt is looming as a national problem that could have repercussions reminiscent of the mortgage crisis, says a report by the National Association of Consumer Bankruptcy Attorneys.

The study, released Tuesday and based on a nationwide survey of 860 bankruptcy lawyers, said bankruptcy attorneys nationwide are seeing "what feels too much like what they saw before the foreclosure crisis crashed onto the national scene."

The report calls for a change in bankruptcy laws.

In the survey, 81% of respondents said potential clients with student loan debt have increased "significantly" or "somewhat" in the past four years.

And 95% of respondents reported that few student loan debtors have any chance of discharging what they owe through a bankruptcy proceeding because they have to prove "undue hardship" — a standard that is difficult to meet.

Total debt from student loans is about $1 trillion, about 14 times more than 15 years ago, and well above the estimated total credit card debt of $798 billion.

The bankruptcy attorneys association's report urges a change in bankruptcy laws so those burdened with student debt would be on the same footing as others facing bankruptcy.

"It's not fair and needs to be corrected," said U.S. Rep. Steve Cohen, D-Tenn., sponsor of legislation that would make changes suggested in the report.

Cohen outlined the revisions in a conference call with reporters Tuesday, along with officials from the bankruptcy lawyers association. Douglas Lustig, a trustee for federal bankruptcy court in western New York, agreed that something should be done.

"The problem is that you have former students who filed for bankruptcy and are not able to get a fresh start," said Lustig, who also represents clients in bankruptcy court.

Those with student debt should be able to discharge all or part of the money owed in a bankruptcy proceeding and the law should be changed so the debt can be paid over a longer period of time, Lustig said.

The high cost of college tuition and room-and-board, plus high interest rates charged by some private lenders, are all adding to the problem, experts say.

"The rising cost of education definitely needs to be in the forefront of people's minds," said Cassandra Robinson, 23, who graduated from the University of Rochester in 2010 and owes about $100,000 in student debt.

William Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys, offered a warning.

"Take it from those of us on the frontline of economic distress in America," he said. "This could very well be the next debt bomb for the U.S. economy."

[Savoir Faire-Demogague in NJ]

"The rising cost of education definitely needs to be in the forefront of people's minds," said Cassandra Robinson, 23, who graduated from the University of Rochester in 2010 and owes about $100,000 in student debt.

Friggin'..... YIKES!!!!

[Phoenix84]

Of course an association for bankruptcy lawyers would push for student loans to be discharged in bankruptcy.

I thought the original reason was some people (doctors and lawyers mostly) would get very expensive degrees, declare bankruptcy, then go on and make big bucks.

I don't know what the answer is. I do think student loans are unsustainable. But just allowing them to be discharged isn't the answer either.

[swamp]

Feb 8, 2012 16:07:40 GMT -5 Savoir Faire-Demogague in NJ said:

"The rising cost of education definitely needs to be in the forefront of people's minds," said Cassandra Robinson, 23, who graduated from the University of Rochester in 2010 and owes about $100,000 in student debt.

Friggin'..... YIKES!!!!

U of R is actually a very good school...............

[floridayankee]

This is just hype SF....even if every single outstanding student loan defaulted, it would be piss in a bucket compared to the trillions lost from mortgage defaults.

[Savoir Faire-Demogague in NJ]

Curious as to how much of this is Fed Govt guaranteed/backed?

[formerexpat]

This is the government's doing. Don't subsidize insane amounts for a lower worth degree.

If the market were allowed to take hold without the subsidization of the government, you'd get $25k communication degrees, $25k English or literature degrees, $50-60k accounting degrees and most people would be good (other than the cracks).

Now you get a obscure history degree or music degree with $75-100k in debt because of the government's meddling in the system.

[fairlycrazy23]

Government subsidizes homes, housing bust.
Government subsidizes student loans, now student debt crises.

What else can the government fix?

[Sum Dum Gai]

The only government meddling that led to this was making student loans nondischargable in bankruptcy. The people getting into six figure debt for undergrad degrees are doing it with private student loans. The federal student loans have much lower limits.

Under the current system student loans are a very low risk loan to make. You know that one way or the other that kid is going to have to cough up the money. That's why they're so readily available and have such low interest rates.

[zibazinski]

If you make these dischargable you are insulting the same people who pay their credit card debts, their school loans, and their mortgages.

[Driftr]

Feb 8, 2012 16:48:52 GMT -5 zibazinski said:

If you make these dischargable you are insulting the same people who pay their credit card debts, their school loans, and their mortgages.

No. You're not.

The people who make their payments are making a business decision to do so. Just like the bank who loaned them the money made a business decision to do so.

[Sum Dum Gai]

If they have no assets and no job, where is the dough coming from?

Are they going to stay jobless their entire lives just to stick it to the student loan lender?

[EVT1]

Feb 8, 2012 16:45:36 GMT -5 Sum Dum Gai said:

The only government meddling that led to this was making student loans nondischargable in bankruptcy. The people getting into six figure debt for undergrad degrees are doing it with private student loans. The federal student loans have much lower limits.

Yep- imagine that- private lenders taking advantage of the law by making risky bets knowing the taxpayer will subsidize any losses. Sounds familiar.

The sick thing about a lot of these loans is that the principle has been long overtaken by fees and interest- if a bank knows anything it is how to kick the shit out of someone that is already down. Glad Obama told the private lenders to get bent.

[Sum Dum Gai]

Yep- imagine that- private lenders taking advantage of the law by making risky bets knowing the taxpayer will subsidize any losses.

So don't change the law and taxpayers won't subsidize any losses. They got the education, they can pay back the loans.

"Oh, woe is me, the job market is hard, yadda, yadda, yadda." Tough shit. It'll get better in a few years and you can pay back what you owe then. Pull up your panties and quit crying.

[handyman2]

I know college is expensive having put a daughter and grand daughter through 4 years each. Although expensive I have observed some students live pretty high on the hog while attending college. It might help a bit if they would economize some.

[Malarky]

I would like to see how the penalties are assessed be changed, but not have the loans discharged in bankruptcy.

The money was borrowed and used, the knowledge cannot be returned.

I'd also like for the first sentence in any loan discussion be: "Interest is accruing as we are talking. You're going to have to pay this. Understand? No? Let me explain this in one syllable words that you can understand."

[EVT1]

Feb 8, 2012 17:50:15 GMT -5 Sum Dum Gai said:

Yep- imagine that- private lenders taking advantage of the law by making risky bets knowing the taxpayer will subsidize any losses.

So don't change the law and taxpayers won't subsidize any losses. They got the education, they can pay back the loans.

"Oh, woe is me, the job market is hard, yadda, yadda, yadda." Tough shit. It'll get better in a few years and you can pay back what you owe then. Pull up your panties and quit crying.

I don't agree with a 100% discharge, but I would like to see it available for abusive debt in the private sector- such as all interest and fees jacked up beyond the federal level. You can't return an education- so it is only fair that at least the principle gets repaid- just allow some serious forebearances.

[Savoir Faire-Demogague in NJ]

The money was borrowed and used, the knowledge cannot be returned.


You can lobotomize them....

[Malarky]

Feb 8, 2012 18:34:54 GMT -5 @toughtimes said:

If the education had been that good, they would be generating the funds to pay it back.

I call BS. You get out of it what you put into it. Motivation is a huge deciding factor.

[zibazinski]

Send them to Dakota and they can work. Same as the rest of the whiners.

[Phoenix84]

I don't claim to have all the answers. I do think something should be done about SL's, but discharing 100% isn't the answer either.

I think maybe putting a time limit on it, like you never have to pay more than 10% of your paycheck for 20 years following graduation. If it's not paid off by then, then the rest is forgiven. Of course, then what would you do for someone who got a MRS degree and married to a rich doctor.

[zibazinski]

He can pay it for her then. We have posters who are paying off spousal loans.

[formerexpat]

The only government meddling that led to this was making student loans nondischargable in bankruptcy. The people getting into six figure debt for undergrad degrees are doing it with private student loans. The federal student loans have much lower limits.

Why do you have to make student loans nondischargeable in bankruptcy?

Because there is no fucking way that any bank would lend $20k, let alone $100k of uncollateralized money to an 18-22 year old with essentially zero credit history.

Right now, it is pretty much lent to anyone but both colleges and banks need to adjust to charge and loan the right amount for the appropriate degree.

Why my college charges essentially the same amount for a Communications degree as an Accounting or Engineering degree, I'll never know. The ROI right off the bat is so much lower for the former and the ability to pay back $100k in student loans with a Communications degree is likely to be so much less than with a hard degree.

And there does need to be some kind of adequacy assessment. Some people should not be in college and struggle through the 6 year degree, taking on twice the debt they otherwise would have. I'm sorry, these people need to get their shit together first and use OPM to find themselves over a 6 year period (not talking about people that are working their way through school).

[dumdeedoe]

Wow I guess we should just on the banks some more....Discharge all SL's,morgages,and still provide me with a free debt card please... We really do hate banks in this country don't we......Aw what the heck they are insured..............

[EVT1]

Feb 8, 2012 22:29:29 GMT -5 formerexpat said:

Because there is no fucking way that any bank would lend $20k, let alone $100k of uncollateralized money to an 18-22 year old with essentially zero credit history.

Why my college charges essentially the same amount for a Communications degree as an Accounting or Engineering degree, I'll never know.

Why wouldn't they- they had no problems handing out credit cards and home loans. During spring break they had credit card sign up booths in the bars handing out free shit (many moons ago). Banks are hardly the bastion of responsible lending.

Do you think degrees should be priced by what the various fields pay on average? Why is a communications degree worth less than an engineering or accounting degree? Does it cost significantly more to teach one subject over another?

[formerroomate99]

Feb 8, 2012 19:23:49 GMT -5 @toughtimes said:

Something is wrong. Either too much is being borrowed, or it is being lent to students with very low potential. I can't believe people actually think that supporting oneself doesn't count as "motivation."

Ding Ding Ding! We have a winner. There are a lot of lazy, stupid people getting college degrees. Most of the people going into those worthless degrees aren't doing so because they have a passion for those fields. They are picking those majors because they are fun and easy and leave plenty of time for partying.

The laziness that causes a mediocre student to continue being a mediocre student and pick a worthless degree because the coursework is easy doesn't go away once they get a piece of paper. The fact that they have deluded themselves into believing that they are on the path to riches doesn't change the fact that they have worthless skills and not a lot of work ethic.

You can call people naive or whatever, and I'm sure some are. But when push comes to shove, ignoring reality and engaging in self delusion is easier than doing your homework and taking concrete steps to get what you want out of life.

I have no problem with someone going into a low paying field. But if you are going to do so, you need to be smart about it, and going into 6 figure debt so you can have the 'college experience' isn't smart.

[reasonfreedom]

Feb 9, 2012 11:05:48 GMT -5 formerroomate99 said:

Feb 8, 2012 19:23:49 GMT -5 @toughtimes said:

Something is wrong. Either too much is being borrowed, or it is being lent to students with very low potential. I can't believe people actually think that supporting oneself doesn't count as "motivation."

Ding Ding Ding! We have a winner. There are a lot of lazy, stupid people getting college degrees. Most of the people going into those worthless degrees aren't doing so because they have a passion for those fields. They are picking those majors because they are fun and easy and leave plenty of time for partying.

The laziness that causes a mediocre student to continue being a mediocre student and pick a worthless degree because the coursework is easy doesn't go away once they get a piece of paper. The fact that they have deluded themselves into believing that they are on the path to riches doesn't change the fact that they have worthless skills and not a lot of work ethic.

You can call people naive or whatever, and I'm sure some are. But when push comes to shove, ignoring reality and engaging in self delusion is easier than doing your homework and taking concrete steps to get what you want out of life.

I have no problem with someone going into a low paying field. But if you are going to do so, you need to be smart about it, and going into 6 figure debt so you can have the 'college experience' isn't smart.

I agree with the laziness aspect. I work with someone that has a degree in one of the best computer graphical design schools in the country. He paid well over 100k for his degree and he is making around 14 dollars an hour and that is just recently before he was making 10. It has been around 4 years since he finished his degree and he doesn't even have a starter job in the field. From watching his work ethics I can see that it is pure laziness, what a shame.

[formerroomate99]

I agree with the laziness aspect. I work with someone that has a degree in one of the best computer graphical design schools in the country. He paid well over 100k for his degree and he is making around 14 dollars an hour and that is just recently before he was making 10. It has been around 4 years since he finished his degree and he doesn't even have a starter job in the field. From watching his work ethics I can see that it is pure laziness, what a shame.

Even if this person had a great work ethic, there has to be a boatload of intellectual laziness involved in racking up 6 figure debt for a degree in a field with low pay and fierce competetion. Self delusion is easy. Making sacrifices now to get what you want out of life later is hard.

[zibazinski]

Did parents actually cosign for these loans for these degrees that may no money? We have a hostess at the club right now who is miserable because her parents paid for a useless degree at an expensive school. DF blames her father for not talking turkey to her before throwing money down the college money hole.

[jupe36]

The government is playing the same game with schools as it did with the housing market. I know quite a few people that are going to community colleges that have no intention of ever paying back their student loans. But who do you tell or rather what do you say-I have no concrete proof-I just know their life style. Rent an apartment-don't pay rent-get evicted-move on do the same thing again. Same with utilities. Get a tax refund (for way more than you paid in)-time for everyone to get the new i-phone! But you know the government-these poor people just haven't gotten a break in life-you just have to give them a loan for school so they can get their life going in the right direction. It really is a shame-these programs do help people that deserve the help-there are just so many abusers these days.... Discussing this problem along with other entitlement programs one of our group said that if the program helps just 1 of a hundred it is worth it. While I think that is a wonderful sentiment, it just isn't affordable.