Shooby
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Post by Shooby on Mar 1, 2015 16:42:46 GMT -5
There was a time when conventional wisdom said that student debt is not a problem in and of itself—rather, “high” debt of $100,000 or more is the more pressing concern. A recent report from the Federal Reserve Bank of New York highlights just how out of touch that view is. A staggering percentage of Americans do not pay their student debt, no matter how big or small.
Analysis reveals that 34 percent of students with just $5,000 of outstanding debt—hardly “high”—default on their student loans. Student debt imperils far more than just individual borrowers’ monthly budgets. It erodes higher education’s ability to deliver on the promise that those who have similar abilities and work equally hard will achieve similar outcomes. Unfortunately, the prevailing policy response—Income-Based Repayment (IBR) plans—does not address the core of the problem. Concern about rising default rates has spurred increasing calls for greater access to IBR plans, which set repayment expectations at 15 percent of the federal student-loan borrower’s post-college income. Those who do not pay off their loans within 25 years can have their remaining debt forgiven. These features make IBR schemes less a solution to actual problems and more of a sort of self-soothing device for the American people to feel better about loans. Parents and older Americans don’t want to see young adults default. Student borrowers want some reassurance that they will be able to pay off their student loans and still feed themselves. Policymakers need to say they’re doing something on the issue of student debt. In the meantime, the true threat—student indebtedness itself—continues unabated.
www.theatlantic.com/business/archive/2015/03/how-student-debt-stunts-financial-growth/386300/
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Deleted
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Post by Deleted on Mar 1, 2015 17:05:23 GMT -5
Part of the solution to the student loan problem is to have the government quit guaranteeing them. Make it possible to have them thrown out in bankruptcy court. The objection that most people bring up is that someone will just file bankruptcy immediately after finishing college, but a bankruptcy judge could see through that and not let it happen. Lending institutions would not lend to students who lollygag their way through 3 or 4 majors with no clear cut plan.
Education is available for free online to anyone who wants to spend the time and effort to attain it. What college is in large part is just a credentialing place. Many computer companies have already figured out a better plan with company certificates. We live in a new world and old world ideas are outdated. Their might be some occupations that still need traditional college for learning, but many do not.
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phil5185
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Post by phil5185 on Mar 1, 2015 18:54:36 GMT -5
A big part of the student debt is increased college cost - and that is caused by excess demand. About 50 years ago, students were male and the available degrees were the traditional liberal arts, STEMs, etc. Then came the push for a degree, HS students were told that they HAD to get a degree. And that included females. So - a doubling of the student demographic for both genders, PLUS the degree push for any kind of degree. Way more demand than the schools could handle - the supply/demand skew drove prices higher at a fast pace. So Student loans were made readily available (I got my degree in 1963, student loans were almost unheard of, truck driving paid the bills for me).
As for not allowing bk for student loans - that was to fix the "graduate and file bk" issue. Yes the judges can see right thru it - but how could they stop it? The kids were judgement-proof, no money.
Recently (the last 5 years) loans are not being made to 'lollygag' students - and college counselors are getting the feedback to guide kids into markatable degrees. And the diploma mills are being regulated much heavier. And the Community Colleges are stepping up with creditable courses so that kids can get the first two years at lower costs.
The awareness at all levels - kids, parents, counselors, colleges - is slowly bring the '6-figure loans & basket weaving degrees' to a halt.
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justme
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Post by justme on Mar 1, 2015 19:26:31 GMT -5
Part of the solution to the student loan problem is to have the government quit guaranteeing them. Make it possible to have them thrown out in bankruptcy court. The objection that most people bring up is that someone will just file bankruptcy immediately after finishing college, but a bankruptcy judge could see through that and not let it happen. Lending institutions would not lend to students who lollygag their way through 3 or 4 majors with no clear cut plan. Education is available for free online to anyone who wants to spend the time and effort to attain it. What college is in large part is just a credentialing place. Many computer companies have already figured out a better plan with company certificates. We live in a new world and old world ideas are outdated. Their might be some occupations that still need traditional college for learning, but many do not. Not exactly. Would you lend tens of thousands of dollars to an 18 yo with no income? I'm guessing not, or if you did it would be at ridiculously high interest rate. Which is what would happen if the guarantee is taken away. Though I also think it's outrageous that they charge as high of interest rates they do given that it's guaranteed. Not only that, the prices will increase due to the loan companies that stick around babysitting the students to see where they are - going over and approving the grades of last semester to give money for the next. And what if they get backed up? The money doesn't come through and the kids then have to skip a semester and scramble for work? Part of the reason it was guaranteed is doctors declaring bankruptcy in their first year of residency earning 50k or less with at least 3x that in loans. You say bankruptcy judges can "see through that" but I'm not so sure they have the latitude to ignore the current standards. If someone with 50k income and 100k in cc debt can get bankruptcy - why couldn't a doctor with student loans that are unsecured? Education may be available for free, but the majority of jobs won't accept that and a lot require a 4 year degree. I probably could have acquired the knowledge I actually use in half the time or less of schooling, but I wouldn't have the job I do if I had left after 4 years. Furthermore most accredited colleges charge the same amount for their online degrees as they do for the in-person ones. Considering the places you can pay $50 to get a fake diploma printed out, I don't see employers taking your word that you took 10 engineering courses on Khan Academy and hire you for the job. None of this is to say I don't think current college education isn't fucked up. It is. Partially because of the government stepping it. The influx of "free" money to the kids is at least partially responsible for the outrageous climb in college costs. The colleges feel no pain if someone defaults, they get all their money in the beginning and have no reason to watch costs when a kid can get tens of thousands of loans per year. There's other things that are contributing to it to though. There's the dilution of classes so that everyone can go to college, there's the race to have the most luxuries on campus, etc etc.
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phil5185
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Post by phil5185 on Mar 1, 2015 19:38:48 GMT -5
At my oldest grandson's college they have a Starbucks in the dorm. LOL, next time I visit campus I'm going to try it.
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Post by Deleted on Mar 1, 2015 19:44:47 GMT -5
At my oldest grandson's college they have a Starbucks in the dorm. LOL, next time I visit campus I'm going to try it. But are you sure that is a "luxury" as opposed to another attempt to separate the kid or the kids' parents from their money?
Luxuries when I went to college were things like a bathroom in your room as opposed to down the hall.
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formerroomate99
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Post by formerroomate99 on Mar 1, 2015 20:18:55 GMT -5
Another big part of it is the fact that you have a lot of lazy, stupid people getting degrees. A piece of paper and some extra knowledge isn't going to help someone who has no initiative, especially when the first 2-3 years of 'knowledge' are things they should have learned in high school.
When my uncles and stepdad went to college (1940's-1950's) , only the smart kids went to college, and the typical party animal would last one semester, maybe a year, before flunking out. Back then, a degree in anything meant that you were hard working, knowledgeable in many subjects, and able to learn many subjects. Now the party animal can graduate with honors without studying that much and a generic degree means didlysquat. I've seen those ex party animals in the corporate world. Their inability to learn new skills kept me employed through several rounds of layoffs.
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alabamagal
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Post by alabamagal on Mar 1, 2015 20:39:43 GMT -5
At my oldest grandson's college they have a Starbucks in the dorm. LOL, next time I visit campus I'm going to try it. But are you sure that is a "luxury" as opposed to another attempt to separate the kid or the kids' parents from their money?
Luxuries when I went to college were things like a bathroom in your room as opposed to down the wehall.
Where my boys went to school, all students were required to live on campus first year, possibly even those whose parents who lived in town. All dorms were suite type with bathrooms in your room. First boy had 4 guys to a room with living room kitchen and 2 bathrooms. Younger on had a two person suite with 2 bathrooms and a kitchen. They also had to have a meal plan, which was over $100 a week. My older son figured out he could use his meal plan at Cold Stone Creamery. He could get a gallon of ice cream in place of a meal! He did that often. This is my underweight son, so the 5 pounds he gained were not an issue. They all lived off campus after their first year and saved money.
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Deleted
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Post by Deleted on Mar 1, 2015 20:53:09 GMT -5
Another big part of it is the fact that you have a lot of lazy, stupid people getting degrees. A piece of paper and some extra knowledge isn't going to help someone who has no initiative, especially when the first 2-3 years of 'knowledge' are things they should have learned in high school.
When my uncles and stepdad went to college (1940's-1950's) , only the smart kids went to college, and the typical party animal would last one semester, maybe a year, before flunking out. Back then, a degree in anything meant that you were hard working, knowledgeable in many subjects, and able to learn many subjects. Now the party animal can graduate with honors without studying that much and a generic degree means didlysquat. I've seen those ex party animals in the corporate world. Their inability to learn new skills kept me employed through several rounds of layoffs. You have obviously never heard of "gentlemen's C's."
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haapai
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Post by haapai on Mar 1, 2015 21:02:20 GMT -5
The second paragraph is a gem. The rest of the article goes nowhere. What a pity!
I think there's some merit to some of the ideas broached in the article.
I definitely struggled while making payments on relatively small amounts of student loan debt. I remember staring at the Quickbooks reports trying to find my error. The income statement showed a healthy difference between income and expenses. The balance statements were improving each period. Equity (net worth) was improving. So why was my cash balance sucking air despite my months of belt-tightening? It took me a while to figure out that most of my operating income was going to debt service. (Oh, so that's what a statement of cash flows is for!) I had very little discretionary income.
It took me a long time to re-engineer my finances so that I had a decent amount of discretionary income. It also took a bit of luck.
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sesfw
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Post by sesfw on Mar 1, 2015 22:25:13 GMT -5
When I was in tech school in 1991-93 several of my classmates told me they had no intention of paying back their loans. These kids were in their 20s and I was 50. I had lived a lifetime of paying our debts.
I graduated with an AA and $17K in SL debt. We made it a priority to get it paid off and did in 3 years.
Common sense is required through-out the whole process.
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haapai
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Post by haapai on Mar 2, 2015 17:10:25 GMT -5
This seems like the place to post my formula for keeping student loans from sinking you financially.
Figure out how much gross income it takes to service your loans. Then subtract that number from what you make before you make any other decisions regarding how you'll be allocating your paychecks.
You don't have to get too fancy about grossing up your student loan payments. Dividing your annual student loan payments by 1-mtr will give you a number in seconds. The estimate will probably be a little high due to ignoring the student loan interest deduction and possible tax-rate straddling but that's probably a good thing. The vast majority of recent graduates can assume a 15% federal income tax, a 7.65% FICA obligations, and state income taxes.
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The Captain
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Post by The Captain on Mar 2, 2015 17:16:40 GMT -5
The second paragraph is a gem. The rest of the article goes nowhere. What a pity! I think there's some merit to some of the ideas broached in the article. I definitely struggled while making payments on relatively small amounts of student loan debt. I remember staring at the Quickbooks reports trying to find my error. The income statement showed a healthy difference between income and expenses. The balance statements were improving each period. Equity (net worth) was improving. So why was my cash balance sucking air despite my months of belt-tightening? It took me a while to figure out that most of my operating income was going to debt service. (Oh, so that's what a statement of cash flows is for!) I had very little discretionary income. It took me a long time to re-engineer my finances so that I had a decent amount of discretionary income. It also took a bit of luck. Dude, I thought I was hardcore but you setting up your personal finances in QuickBooks and doing a personal cash flow?
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haapai
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Post by haapai on Mar 2, 2015 17:27:03 GMT -5
Nope, I never prepared the statement of cash flows for my own books. But that was when I realized why corps were required to prepare one. It was an epiphany. I used QB because that's what I had at hand. It was a leftover from my short, unhappy stint as an accountant. Notice how my epiphany regarding what that oft-forgotten fourth statement was good for occurred after I had left accounting?
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Angel!
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Post by Angel! on Mar 2, 2015 17:31:12 GMT -5
While this is true, it is completely cherry-picking data. It also seems not very relevant to use this bit of data when trying to show student loans stunt financial growth. If less than $5K in debt to be paid back over 10-25 years was going to stunt your financial growth, you are pretty screwed regardless of whether you bother to pay it back or not. The truth is the higher the loan balance, the less likely someone is to default. You can make a few guesses as to why this is. My guess is lower loans could mean it is less likely they graduated, which means they didn't get the eventual higher income as a result of having a degree.
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shanendoah
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Post by shanendoah on Mar 2, 2015 17:45:38 GMT -5
Okay, it's been about 20 years since I worked in a student financial aid office, but please, let me clear up some misconceptions.
Most of the student loan debt problem is caused by PRIVATE student loans. There are already limits in place for how much you can borrow in federal student loans, both a yearly limit and a total debt limit. Up through the 2006-2007 school year, the graduate yearly limit was 18,500, it's now 20,500/year. You also cannot borrow more than $138,500 aggregate total in federal student loan debt. This total is for graduate students, and includes the money they borrowed in undergraduate, as well. The aggregate total for undergrads is $57,500. (Limit information found here)
In addition, schools are held accountable if too many of their students default. If the school's default rate goes too high, the school is no longer eligible for government subsidized loans. One of my jobs in the office used to be to go through the yearly default report and mark new defaults, as well as track the "forgiven" loans, which also showed up as defaults (this being for people who died, became or were permanently disabled, etc).
Also, it was assumed at the time that you would take 10 years to pay off your student loans, provided you didn't go into deferment or forbearance. You had to attend a short entrance interview (about 30 minutes talking about student loans worked, including repayment) before you could borrow, and were also supposed to take an "exit interview" (also about 30 minutes) when you left school, to remind you about the terms of your loans and how repayment worked.
Currently, most federally guaranteed loans are not federally guaranteed anymore, instead they are direct loans from the government, instead of running through banking institutions.
I'm not saying there aren't issues with federal student loans, but when we talk about the problems of student loans, we really need to understand that there is a difference between the federally guaranteed/federal direct student loans and private student loans.
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formerroomate99
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Post by formerroomate99 on Mar 3, 2015 9:08:41 GMT -5
Another big part of it is the fact that you have a lot of lazy, stupid people getting degrees. A piece of paper and some extra knowledge isn't going to help someone who has no initiative, especially when the first 2-3 years of 'knowledge' are things they should have learned in high school.
When my uncles and stepdad went to college (1940's-1950's) , only the smart kids went to college, and the typical party animal would last one semester, maybe a year, before flunking out. Back then, a degree in anything meant that you were hard working, knowledgeable in many subjects, and able to learn many subjects. Now the party animal can graduate with honors without studying that much and a generic degree means didlysquat. I've seen those ex party animals in the corporate world. Their inability to learn new skills kept me employed through several rounds of layoffs. You have obviously never heard of "gentlemen's C's." Gentlemen C's? Do you mean gentlemen's clubs? My uncles went to college on the GI bill right after WW2. Most of their classmates were older veterans, not rich kids.
My stepdad also went on the GI bill in the early 50's. He's the one who told me that the party animals didn't last at a school that today has a reputation as a party school.
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Deleted
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Post by Deleted on Mar 3, 2015 9:17:18 GMT -5
No, it's a grade. Here's a nice quotation about it: "As my second semester began, I learned about the Gentleman's C, the grade reserved for those who cut class from time to time, who didn't especially bother to take notes or join in class discussions, and who knew enough (most of them had gone to second-tier prep schools) to write passable papers and blue book essays. The fellow who danced with Charlotte Ford was also the chap who got a C in our freshman English class. Not only didn't he feel dejected (as I certainly would have felt) but he was downright giddy because this was a Gentleman's C. Let the other guys worry about their grades. They were, in the put-down phrase of the day, "curve busters." They were largely the same guys who could not join his fraternity, nor would he ever cross paths with them after graduation. He had a position in daddy's company nailed down and waiting for him." irascibleprofessor.com/comments-09-05-12.htmOf course, he say it's a B- now.
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midjd
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Post by midjd on Mar 3, 2015 9:18:32 GMT -5
Ah yes, the early 50s... an idyllic time, when only the deserving were on top
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Ryan
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Post by Ryan on Mar 3, 2015 10:25:57 GMT -5
It is kinda ridiculous how fancy college campuses have gotten. I graduated in 2000 and considered pretty sweet that they had a salad bar and a place to make your own sandwiches in my cafeteria. When I left, they had just built a cafeteria that had "stations" for every type of food (mexican, ice cream, italian, etc) with a new payment system. Instead of a traditional dining plan (lunch, dinner dining plan), you paid with points that were more like money. It was also open most of the day.
Now I think I heard that it's more like a food court with private companies selling food.
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Ryan
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Post by Ryan on Mar 3, 2015 10:30:22 GMT -5
Truth be told, I think back on my own college experience of all the drinking I did and how much potential trouble that could cause and I cringe. I can't imagine ever sending my kid to a big school...I think I'll just make them go to a local college. hah
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