Forum Post: Student Loan Bailout, great idea!
Posted 13 years ago on Oct. 17, 2011, 9:23 a.m. EST by Cuwen
(43)
from Clarinda, IA
This content is user submitted and not an official statement
I saw some signs and read some interviews about how one of the demands could be a bail out for student loans. I don't know what this would do to our economy, but dangit! I like that idea of a student loan bailout! I have over $35,000 in debt, and if corporations get bailed out, I think students should get bailed out, too! How are we ever going to pay back these types of bills with the interest just accruing and accruing? That could be another option: get rid of the student loan interest.
The difference is that the banks already paid back their bailout. If you got bailed out for your student loan I doubt you would pay it back. Also how is that fair to people who had to pay their debt? Or people in the future who will have to take on debt?
No. They did not. Ha, ha ha. I keep hearing this on this forum,and it is totally absurd. Many paid back the recapitalization program in which the government purchased preferred stock.
The bailout of the derivatives and the insurers (AIG) of those derivatives were never "paid back."
Many of the banks that paid back the recapitalization were healthy and solvent but given your free money so that we, the public, would not know which banks were so underwater.
Eh, that is a popular...misconception. Certainly they have had the money to pay it back already, but they wrote in a tax shelter for themselves into the IRS code. They do not have to pay it back and they also do not have to pay taxes on any of the profits they made from that money either. We pay it back. Of course, this has been hidden from the American public. I'm a lobbyist; I know. I've seen the stench of corruption reach high up to heaven and that is why I support this movement.
They didn't really.
They took money from the Fed, inflated their asset numbers with foreclosed homes, lent out more money than ever and continue to invest in high risk areas.
Worse, they took from the Fed @ 0% and lent it back to the government in treasury bonds ... making interest on nothing. Then paid us back with that.
It would be like me borrowing a dollar from you, then loaning that dollar back to you with interest, then giving you the original dollar. YAY!!! That's convenient.
Well, shows how smart the government is for starting the bailout in the first place
Unfortunately, it's a tough one.
Let's look at the situation:
Option 1) Let The Banks Collapse This causes a run on money that banks don't keep in reserves. The entire foundation of the banking system is ruined. The dollar collapses and we end up in an insane place.
Option 2) Fund the Banks This props the banks into a tenable position. Allows people to continue their day to day life. Power is restored and while our faith is shaken, we still believe that our money is safe.
The issue is that we went option 2 and put no measures in place to protect us from the same incident happening again. We put things in place to let them bilk more money from the taxpayers.
That said, I didn't agree with the bailout -- but it was a tough call. One I owuldn't want to make.
That is insane if that's how it really happened. I think they put so much legal tape around it just so that others wouldn't be able to figure out exactly what it is that they were doing.
We just need some common sense on student loans and realize that these are students trying to get an education, not some product that big corporations can squeeze money out of. Students should not be a money-making opportunity! There has got to be a better way.
Also, the fact that tuition has increased at twice the rate as inflation is absolutely ridiculous and should make everyone furious.
It is how it happened. Additional information can be found here: http://www.businessinsider.com/what-wall-street-protesters-are-so-angry-about-2011-10
Cost of schooling has gone up because demand went up. We can't be angry that we told everyone to go to school - and when they did the schools had to increase the cost in order to stay ahead. This is natural supply and demand.
The truth is - we have too many people. Period. That's the true root cause ... but it's not a solvable one for the short term.
Education is a privilege that we allowed to be turned into a necessity. We allowed the jobs that made this nation great become low paying slave wage jobs that no one wants.
the reason why education costs are skyrocketing is because of gov't guaranteed loans....banks/lending institutions know their loans are insured by the govt and schools can charge whatever the fuck they want because they know students can get all the money they want from the govt...this is called a moral hazard....plus take into account that since its increasingly easier to go to college due to this moral hazard, more people are graduating with degrees, making your degree LESS valuable (even though your tuition still went up!)....fancy that!
That's definitely one cause (and certainly an effect). Much akin to our medical insurance -- a doctor charges exponentially more than a procedure costs because we have insurance picking up the tab.
Another cause is that demand and supply has changed. Now that everyone goes to school, school occupancies are nearing thresholds.
So, it's a combo
Demand went up because the government made loans available to anyone with a pulse. Tuition costs continued to rise because, apparently, those paying tuition felt that it was worth $xx,xxx to get a degree. If at some point, prospective students would have said, "Wait--it's going to cost me 100K to get a degree with which I can expect to get a $33K per year job--maybe this isn't such a good deal.", then demand would have decreased and tuition costs would have dropped as well.
I'm not putting all the blame on students. The government is to blame for making loans available, parents hold some blame for not helping their children to do an ROI on getting a degree, and college advisers should be held liable for not counseling students on the reality of what their product was worth.
The other side of the supply/demand spectrum is the dilution of the qualified candidates available to the work force. The government convinced everyone they should have a higher education in order to get a better job and improve their lot on life (we'd like to think some people are educating for the sake of educating, but that simply is the very small minority). In most cases - it is kids who grew up hearing they wouldn't get anywhere without the education.
In the past, funding for education was not as readily available as it is today, so people accepted being resigned to the fact that they wouldn't have the opportunities -- the blue collar class grew and built a strong middle-class base. Now, everyone expects to get a higher education, so whereas in the past, you might have 10 academically qualified students vying for a job, you now have 100 vying for a job.
Additionally, companies are finding ways to consolidate specialties in job descriptions so they are more particular about candidates. This has become even more true in the IT industry where one could be a simple database administrator and make a good living, but now they need to be a database administrator and programmer. This makes it especially hard for people coming out of college with a singular specialized degree and no experience.
The long and short of it is this - higher education has been devalued by the increase in degreed workers. The middle-class is shifting toward the upper-class, but it's only a small percentage, which is widening the gap between them and the "lower-class" (I mean that only as a financial term). The resst of the blue-collar middle-class is sinking into poverty status. An amazing phenomena considering how many more college educated people are out there wouldn't you say?
I'm not sure I understand the link between blue collar workers sinking into poverty and more college degrees out there.
The unemployment rate for those with degrees is roughly 4% right now, so those with degrees are faring better than those without. I also believe it varies tremendously depending on what one's degree is in. There are loads of jobs for engineers, but not so many for art historians.
Every program the gov't funds and promotes (housing, healthcare, college) has, and will, skyrocket in price. Get gov't out of pushing things on people and financing them, maybe then ROI for college will increase. It is delusional to think we can educate our way out of this economic calamity like candidates claim. Most jobs IN REALITY don't require a degree, but the students rack up debt making them poorer down the road and leaving less money to be spent in the economy. To be sure, the universities are co-conspirators in this reaming of America UNDER THE GUISE that education is always good and will provide better job opportunities... I call BS. Anyone who paid for college in the last 5 years only added debt that cannot be discharged in bankruptcy and has flimsy job prospects--in addition they paid a proportionally higher percentage in relation to their future earnings than every generation before them--that's what happened with housing before it went bust. And now that nearly everyone has a college degree--do you think it's value is increasing, or decreasing???
I propose we make the universities pay the gov't for a forced write down on these loans and we reform student loan financing.
You're missing the other side of that, LibertyFirst. The government (signed by Clinton into law) removed the ability for citizens to declare bankruptcy on student loans. Collection agencies can go into personal paychecks, tax refunds, and even social security checks and take out the money owed for student loans. Thus, there is a "moral hazard" that exists. The government can make loans to anyone, knowing citizens will be harassed until the money is paid back. And colleges can charge whatever they want, because the loans will always be provided by the government. So it's only demand which increases the price, but also the "moral hazard" that exists.
I think the entire student loan process needs to be modified. That is not to say that I support or encourage people filing for bankruptcy. The bankruptcy option should be available and should be allowed only under extreme circumstances--not as a way to start over because one made a poor financial decision.
There are all manner of provisions and conditions within the system that need to be fixed, but I don't think it should be easy to discharge student loan debt. I am as angry at the banks and the government as anyone else, so please don't accuse me of being on their side. But when we talk about making systemic changes, we need to consider the long-term effects.
With something like a home or car loan, the asset is the collateral so if I don't pay my loan back, the lender has a means of mitigating their loss (they take the underlying asset). But a lender can't take back the education. There is no collateral backing student loans. For this reason, it should be more difficult to discharge the debt, and/or the loan term should be modified to require collateral.
And I will say this again to hopefully avoid a tangent. I agree that the banks are evil and that the system needs reform. Please don't accuse me of sticking up for the banks. I'm talking about long-term potential solutions.
But that again applies the business mentality. Business should not be considered when education is at stake. Not everything should be about making a buck.
Cuwen,
That's foolishness. Education costs money. Period.
Secondary education is not necessary. There are plenty of jobs that do not require education --- but we believe we are above these jobs.
We should look at an improved primary education system.
It's not that we believe we are above these jobs. College isn't always about just getting a good job. It's also about increasing one's knowledge. Yes, you can do that yourself with the internet, but sometimes it's good to have educated, experienced people guide that learning and be able to learn with others, share ideas. It's not just about getting a job. Educating people shouldn't be about business.
And a lot of those jobs that don't require a college education don't pay enough for a person to live off of, and I'm not talking about living with a cell phone, games, all that. I'm talking about simple living and being able to afford food.
I agree and love the idea of education for education's sake. That doesn't mean someone else should have to pay for it, nor does it relieve one of the responsibility of determining if the cost is worth it.
No, someone else should not have to pay for it, and the costs shouldn't be so ridiculous that it's nearly impossible for a normal person to be able to afford it. Having a degree cost the same amount as a house is ridiculous. I guess with that said, it's still putting a price on education... Which I hate. It's like we have to play the game in order to change it. Business and banks should be taken out of the education world.
Fair enough, and I agree. There is plenty of blame.
But why does the government need to bail out these people???
A straight bail out scenario benefits no one. It doesn't teach a life lesson and it continues the cycle of non-accountability.
I don't have an issue with: 1) Government buying the loans and becoming the loan holder at a new interest rate with new rules governing payback. But at the end of the day, these students took the loans and got the education. They don't deserve this privilege for free. 2) Complete reform of student loan industry.
Sorry, I wasn't clear. I don't support a student loan bailout. I think a lot of students and their parents made some really bad choices but that is no reason for a bailout (moral hazard, anyone?).
Student bailout? how about you get a fucking job, or don't get the debt in the first place. You KNEW what you were getting into.
I'd love to "get a fucking job," Anomnomoose. Will you hire me?
Circumstances are drastically different from when individuals accepted those loans. More importantly, student loan debt is a different beast with draconian terms and the fact that it cannot be discharged in a bankruptcy proceeding, ensuring no "fresh start."
Then ask for student loan reform. But a bailout?
Unfortunately, everyone accepted the loans and the draconian terms. Don't tell me it is because you didn't have a choice. You could have started demonstrating when you saw how lopsided the fairness was on these loans... but you didn't.
You just can't expect the taxpayers to bail everyone out of every bad idea. That's what half this movement is about.
Reform would be good. It would be great. Although, we want to be careful when it comes to charging big businesses tax. It could be a great idea, but we also don't want this to lead to a socialistic mentality. Corporations do deserve to make a profit if they go about their business in the right way. But they should also have to pay taxes like everyone else. Those taxes could go toward paying student loans.
Also, the government should spend the tax money a lot more responsibly and reasonably. Then they'd have more money to spend on things like student loans.
As I keep asking - why should ANY tax dollars go to paying student loans regardless of where this tax was received?
There needs to be more accountability for the government spend. Corporations have stepped out of line, but the real culprits in all of this is government. They have been asleep at the wheel and quit representing true taxpayer interests a long time ago.
The government should not "bail out" student loan holders -- unless they plan on taking over the debt and still collecting but at a lower %. There is no reason to allow a whole generation of people to be free of their duly signed obligations.
i lost mt physics research job
when I quit working for the military industrial complex
Amnesty paid for through a Wall St. transaction tax on the exchange, sale, and purchase of their financial instruments. We are taxed on our transactions: groceries, shoes, house, car, computers, etc. It is time that they are taxed like the rest of us.
University funded write downs would be my choice (they pay the lender who writes down the loan) We need them to control spending, like 100million dollar football programs, and this would force them to do it.
Fair enough - by why would this tax go to bailout student loans rather then the plethora of other government nonsense?
The issue with raising more capital for the government is that they are spendaholics. They will spend it before the money hits the bank.
We need government reform before we can begin to think about other ways to tax or unburden this country.
There should be plenty of additional money for other priorities as well from the Wall St. transaction tax, and THAT is a "fair" tax. It is a long overdue tax that has existed in the past but was removed.
I agree that perhaps this needs to be looked at.
But again, you're not fixing any real problems.
Do you expect our government to be able to spend the money properly? They've never shown the propensity for that type of skill in the past.
Reform the government and the politicians -- heal our system. Then we can have an honest discussion about everything else.
I am in favor of reform, but that is an abstract concept ("reform"). My reforms are specific policies designed to fixed the crisis in housing and liquidate excessive debt to start the economic recovery that we need.
Reform is great, but we need specific, actionable, and economically/politically feasible policies for the "now."
Well, I definitely think you should. I think it'd be popular. And I would have replied to your reply to me directly, but I didn't have the option to. Only could click on 'permalink'.
I think you should make a topic about this, Justice4All.
I am definitely thinking about it. It is so important and could achieve so much to bring equity to our tax system.
Exactly. Thank you very much for pointing that out. And I do have a job. Doesn't mean that the debt is any easier. And if you look at the contracts that are given for these loans and the lack of information that is given to students when signing up, as well as how things have drastically changed in just these few years, then of course you get students who had no idea what they were getting into.
That is why I donated to Elizabeth Warren recently. Her idea of a Financial Consumer Protection Agency was way overdue. Now if it can just get up and running despite congressional roadblocks......
Thank you. She is the best legislator working aggresively for the masses. It is, therefore, NO COINCIDENCE, they kicked her out of the running to head the CFPA--the banks were terrified of her, and their bitch-boys in Congress withdrew support for her.
I'll have to Google this and check it out. Thank you very much for the information.
Please do. The CFPA can be a real step in the direction OWS wants to see the country go. Such radical ideas as credit card agreements written in plain English, and an agency to try to keep retail lending honest.
I'm excited that Warren is running for Senate in Massachusetts, even if I don't live there.
You knew you'd have the debt going in. You could have researched your career path. You could have did better in school. I know I could have. I'm 40K in debt but I recognized that is my own fault. I knew going in the cost and I knew coming out it wasn't a guaranteed job. But I took it anyway knowing the risk. The colleges need reformed. They make you take a lot of fluff classes and they spend their tuition gains on a lot of unneeded things.
But giving students a bailout is as big of a mistake as bailing out the banks. Learn some responsibility and pay off what you owe, maybe it will teach you to better manage debt and not end up drowning.
Now eliminating or reducing the interest may be a way to go but would take some more research.
A question: who amongst the "Occupiers" voted in the election in 2008 and 2010 that put in place our current Members of Congress, the Senate and the Presidency?
Only 41.5% of eligilble voters cast their ballots in 2010...did you? If you didn't, you surrendered without a fight. Now, you want to complain? Complain at the ballot box, like the 41.5% did in 2010. Or are you too busy with your iPhones and iPads and iClasses and iDungeonAndDragons?
Keep reform ideas coming, please! Ideas is where it all begins, I think.
By not acquiring them in the first place. If you bail out those who can't afford their student loans then you also have to bail out everyone who's paid them off and everyone who is paying them off.
People who have paid them off probably were paying them off when the economy was a lot better, gas wasn't through the roof, and food was affordable. That's what a lot of us are saying. Things have changed drastically the last few years, and that should at least warrant consideration of a student loan bailout to those who are paying them off.
Than perhaps bailout isn't the right term, but rather term renegotiations.
at least students are trying to contribute to society rather than leach off of it. But this can't be what the movement is about or no one will take it seriously
I love all the discussion on this topic, both for and against. Constructive criticism and the flow of ideas is what we need! I hope people keep it coming.
I completely agree with debt forgiveness under our current situation. This is not a radical idea and many ancient cultures forgave people's debt every few decades because they seen how a debt driven system will inevitably spiral out of control. Unfortunately, there are too many people that will call debt forgiveness Socialism, but will also argue that bank bailouts is Capitalism at it's finest. Those bailouts could have been used to pay off people's mortgages and at the same time would have given banks liquidity. Instead of giving banks a blank check, the money could have killed two birds with one stone. It was so obvious that this would have been a better solution, but it still amazes me that our "leaders" couldn't see the same thing.
Yes, the money should have been given to people with mortgages. The banks would have been paid and the people also would have benefited, not some organization that has no intention of passing the benefits on to the consumer.
I want reform AND current debt forgiveness under the current situation in the economy. Giving people the money, people paying off debts on education, is the best way to give a 'bailout'. Not to greedy corporations.
But unfortunately, many people in America feels that givin any aid to someone in need is Socialism and should not be tolerated. The truth is if you do help those in need, that money eventually ends up getting absorbed at the top. I hate hearing people talk about trickle down economics because wealth trickles up!!! The only thing in our society that trickles down is debt. I wish people would step back and think about what Capitalism, Socialism and Communism are. They are a figment of the imagination. They are ideas and having no mathmatical basis. Economics is economics regardless of what the goverment claims their system to be. So while I don't believe in any of these "isms" I do think money lending should start at the bottom. Large companies would adjust accordingly and maximize production if there was more money in the hands of the many. The market works great for price discovery, but is piss poor when it comes to social justice. In a civilized society, there is no excuse for people to have nothing in America.
I do think if we are going to be successful on student loan reform, we need to be reasonable. What we really need is to be able to renegotiate the terms of our loans; something we have absolutely no power to do right now. When folks are unemployed and have to defer, the student loan grows until it is the price of a small house. And it isn't like a student loan payment builds up any equity! Before 1996 and the great bubble in college costs - student loans were very reasonable and one did do well financing education this way. Pre 1996, that is what I want.
Yeah, if they're going to charge us like normal loans, then why don't we get the benefits from typical loans? And I don't think payments on loans should be taxed at all.
I haven't thought of that angle before. I was thinking about something much more drastic; change the interest rates and how it accumulates. Make sure payments go towards principal first; interest last and don't add accrued interest to the principal. Things like that.
man we gotta do something about the Universities... it's getting ridiculous... they are running these Institutions like a business for sure... check out this article http://www.washingtonmonthly.com/magazine/septemberoctober_2011/features/the_college_forprofits_should031640.php?page=1
Colleges are milking their students for all they can get... with "federal backed loans" the colleges can't lose... if you have like 150k in student loans... you are f* for life right now with the current laws the way they are... you are forced to pay it, you can't even declare bankruptcy
yeah, seems like the only way to get out from under this loan type is to become an ex-pat, take your assets with you, and use only a bank that has no US braches... or petition your legislators, who are impotent, confused and act for themselves only.
Exactly!!! Colleges need to have reform, too. Though, too much government involvement would probably destroy the free-minded-ness about college that makes it great. But college shouldn't be run like a business. That's not what it is. College and student loans need reform. I just pray that we as a country can come together and think up a great solution.
Totally agree... too bad it seems like a lot of them are... shouldn't it be about education?
Yes it should be! And it almost seems like the student loan people and colleges work together just so they can raise costs and then reap more money. We also are on the losing end. Education is not a business. It seems more and more like everything in the country is becoming about business and how to earn a buck. Not everything should be about that.
BAIL OUT our students!!!
Sorry. I sympathize, but no.
I, too, have a ton of student debt -- but who is going to pay for it? Who gets bailed out and forgiven and who doesn't?
This would just further exacerbate the issue of government fiscal policy.
bank bailouts were a symptom of corporate greed. student loan bailouts would be a symptom of ??? greed.
Yay!
If X does something that is morally wrong and bad economically I should get to do the same thing!
But we didn't even do anything wrong when we signed up for student loans! We were told the interest rates would stay about the same and we should be able to pay loans back in X amount of time. Now everything is messed up, and people with student loans are just being left in the dust UNLIKE those big corporations who DID do something wrong and should be punished. But they get a bailout while we students who were just trying to get a good education are still suffering.
Nobody told you anything like that. They told you the terms. You assumed your would make X and be able to pay it back in Y years.
You made an agreement - you might have been making this agreement based on assumptions of your which were wrong.
This should be taken as a lesson to not make such assumptions and to be more careful with your agreements in the future. Nobody taught you sound financing so learn. So many of my friends through college had to learn these rough issues as well. Poor choices of majors that have no real world relevance or expecting 80k a year with no experience.
Get a deferment on your payment or if you can't pay it take the 7 year hit of horrible credit and get over it.
I thought this movement was against wallstreet...not mainstreet....I know alot of tax payers that would be paying for student loan bailouts that had nothing to do with corporate greed....why should they pay for your loans?
Not to mention...most students (including myself) have large student loans...and even those with good jobs chose to pay them off as they have very low interest payments....are you planning to pay off their loans too..... just trying to understand your idea
Well that's just it. I made a comment just a few minutes ago (though it was probably at the same time you were making your idea, so you didn't get a chance to see it) that we do not want tax payers paying for student loans. We help pay for everything else. We don't need increased taxes to also pay for college.
BUT, something does need to happen. College is getting way too expensive. Tuition needs to go down, but right now what I'm saying, inspired by the signs and interviews I read, is that since the government bailed out Wall Street, then they should bail out people with student loans, too. While this is happening, we could all think of another alternative to having interest rates on student loans. We're a very smart country. We can think of a better way that doesn't cost tax payers money. I don't know what this is by myself, but I know that as a country we could! It's not working the way it is now.
i just live in Holland for 3 years...they have EUR 1,500 a year tuition ...and they pay for it with 52% tax. So in the US we pay only if we go to college and then we only pay while we are there....in essence a use tax....the Dutch pay every year they are allive a percentage of their income whether they or anyone in their family ever go to college....either way you have to pay for it...campuses to build themselves...they dont maintain themselves....museums dont grow on trees and professors dont work for free.....so what do you prefer...pay for it as a 52% tax for the rest of your life...or have the choice?
This movement has lost it's focus and is being hijacked. To many people are looking at it as their own personal political football. To naive to see that's what the powers that be want. Moveon.org has infiltrated this movement and now it's only a matter of before they bury the protesters in so much Obama propaganda they can barley remember what their own names are.
I hate to say it but while this movement is growing in numbers it's slowly dieing and being morphed into exactly what it was meant to fight against.
I agree with you and I have been very vocal of this on this form. This movement is hijacked by interest groups like unions, politicians . If any change has to come it has to come from Washington DC. As soon as we raise this voice, we are stopped. I think DC is controlling us. I hope not.
Actually, I'm not sure we want all the change to come from DC. If we rely too much on that idea, then this country might become a socialist country. We definitely don't want that. But we also don't want what it is now. There has to be a balance, and I think that's what the protest is largely about, in my opinion.
Though I do agree that DC is trying to control us now, and that has to stop. It's a government that is supposed to fear the people, not the people that fear the government.
I don't think it is hijacked just yet, merely in the process of being hijacked. Silly kids couldn't stay focused and now the professionals will use this to enslave them. =(
It's not to late but i can't see them figuring it out in time to save this movement.
Taxpayers would not be involved. Wall St. would be through a transaction tax on the sale, purchase, and exchange of financial instruments.
We are taxed when we buy/sell something: food, cars, houses, etc.
It is time for Wall St. to be treated like the rest of us.
Oooh! This isn't a bad idea. I hope you are getting the opportunity to talk directly with some of the protesters. :)
Well, student loan amnesty is necessary because student loans cannot be discharged in bankruptcy. It is really a monster of debt that is stuck in this economy and weighing it down.
The only people who benefit from student loan debt are the 1% on Wall Street from the interest and principal payments.
I'm glad you agree! All these loans, not just student loans, are weighing the economy down with interest. I know interest needs to be there for PRIVATE companies that provide loans, but the rate is getting ridiculous, and right now, student loans need to just have the interest rate go away entirely. I don't know how we'd get money in order to give out student loans, and raising taxes is NOT the way, but surely we as a smart country could think of another solution.