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Think this will take hold across the rest of the nation? With a borrower defaulting "every 28 seconds" I guess they have to do something. Evidently, the hefty salaries that are supposed to come with an expensive degree aren't immediately realized:
david18 hours ago
Let me see if I understand this article: Students applying for loans are going to college. They have met the requirements for passing high school and the admittance score to enter college. However, they don't know how to read a loan, understand the interest rate, know how much and when each loan payment is due. Therefore, they need a law protecting them. Is that about it?? Sad. No parent to advise. No school counselor to advise. No home town banker to advise.. They need that government of California which does financial things sooooo well. AARRGG!!
I think there should be some relief for loans because there extenuating circumstances. The kids and parents need to understand the loans. The truth is that not all kids belong in college. We possibly need to go more of a work for your loan as you take it out route and have some on the job training/apprenticeship along the way. It would certainly cut down on colleges handing out out degrees to everyone particularly when it isn't feasible for the kid to get a job later. There would be more of a purpose in the training or degree.
For what it is worth, many lawyers don't even understand how today's student loans work; expecting a high school grad to understand the ins and outs of interest capitalization, fixed versus variable rate, amortization is ridiculous. Most adults can't explain it. You often need a lawyer to explain and negotiate mortgage terms, but we ask teenagers to sign promissory notes which are just as complex every day.
Also, given that the terms and conditions of the loan can (and probably will) change many times over the life of the loan, what you sign onto at 18 may be a very different animal from what you end up agreeing to 15-20 years down the line when (if) the thing is actually paid off. It's like a mortgage, basically only with fewer borrower protections.
Calling students dumb because student lending is a racket engineered to benefit both private lenders in cahoots with the dept of education is just intellectual laziness. I'm not saying anyone here is doing this, but it's a common theme you see in any student loan-related news article. It's much easier to blame the straw man 'lazy Millennial' for all of their financial woes rather than to ask why college tuition has inflated > 200% or why interest rates on student loans are > 8%.
There is no 'working your way' through college anymore; not when State tuition is over 6 figures. Fed student loans are inevitable for the majority of today's middle and lower-middle class who want a college degree, a situation which didn't exist a few decades ago. The system is broken.
Last edited by vladlensky; 05-30-2019 at 09:07 AM..
For what it is worth, many lawyers don't even understand how today's student loans work; expecting a high school grad to understand the ins and outs of interest capitalization, fixed versus variable rate, amortization is ridiculous. Most adults can't explain it. You often need a lawyer to explain and negotiate mortgage terms, but we ask teenagers to sign promissory notes which are just as complex every day.
Also, given that the terms and conditions of the loan can (and probably will) change many times over the life of the loan, what you sign onto at 18 may be a very different animal from what you end up agreeing to 15-20 years down the line when (if) the thing is actually paid off. It's like a mortgage, basically only with fewer borrower protections.
Calling students dumb because student lending is a racket engineered to benefit both private lenders in cahoots with the dept of education is just intellectual laziness. I'm not saying anyone here is doing this, but it's a common theme you see in any student loan-related news article. It's much easier to blame the straw man 'lazy Millennial' for all of their financial woes rather than to ask why college tuition has inflated > 200% or why interest rates on student loans are > 8%.
There is no 'working your way' through college anymore; not when State tuition is over 6 figures. Fed student loans are inevitable for the majority of today's middle and lower-middle class who want a college degree, a situation which didn't exist a few decades ago. The system is broken.
I am glad you brought up mortgages.
Student loans are nothing more than government-backed sub prime mortgages circa 2006-2007, except you can't default on them. This is just another government created bubble, that when it bursts, the ignorant people will blame the banks instead of the government policies that enabled it. In the real world a bank would never lend an 18 year old $200k at 8% to study Gender Issues in Film, but if the loan is government backed and guaranteed by the government there is literally no reason to refuse, since no due diligence has to be done and the government guarantees that there can be no default on the loan with no collateral. And in most cases it might even be illegal to deny a loan.
Since most of these sub prime student loans will have no chance of getting repaid (very hard to do working as a barista at Starbucks), the banks at some point will have to write off these loans, and the government would have to front all that money to the banks, since the government acted as a guarantor on these loans. The public, of course, will be up in arms over the fact that the government will have to pay over $1 trillion to the banks, there will be mass hysteria and investigations.
If the government stops acting as a guarantor, undergrad tuitions for most non-marketable degrees will crash to $5k a semester, instead of $20k-50k. The only people the banks will lend money to would be the ones that go for jobs that will guarantee a replayment.
For what it is worth, many lawyers don't even understand how today's student loans work; expecting a high school grad to understand the ins and outs of interest .......
What is so incomprehensible about "If you borrow money, you will have to pay it back".
Also, three minutes on google will clue you in about the job salary value of any field of study. And lets not forget the endless articles and discussions online about student loans and the problems they cause.,
...and they say that kids today are smarter than previous generations.
If anyone actually read it, This only extends to student borrowers the same rules and protections that the rest of us already have with credit card and mortgage disclosures. It's not a bailout.
It's not all applying to four year college either. There are many private tech schools that open near low income areas and prey on people with limited knowledge of how the world of loans works, they are only trying to better themselves. These schools don't disclose actual borrowing costs, they are commission salespeople trying to make a sale. People end up having borrowed $30,000 for a technical degree as a "medical assistant" or some other low wage job. These schools have demonstrated high,y predatory lending practices and have been closed for this in some cases, taken to court in other states. This bill is an attempt to force them to disclose what these people are actually signing up for. Why anyone would have a problem with that I don't get. If it prevents even a small percentage of defaults, it's still good. Many adults have been fooled by high pressure salespeople whether it's for a car they bought or in the case of elderly, things like Craftmatic bed ( I had to threaten to call the police to get one out of my grandmoms home once)...they are fast talking and know what they are doing. A young person especially one with limited knowledge of money issues is easy prey. All this bill does is require them to be upfront and honest what is so horribly unAmerican about that??
Last edited by toosie; 06-02-2019 at 01:57 PM..
Reason: No language filter work around permitted
"According to the Assembly Bill, California is facing a “student debt crisis,” with more than 3.7 million borrowers owing nearly $125 billion in student debt, which is about $33,000 on average.
The overall level of outstanding student debt in the U.S. stood at $1.49 trillion in the first quarter of 2019, up $29 billion from the last quarter, according to the New York Fed.
And borrowers are increasingly unable to meet repayment deadlines, with delinquency rates rising steadily from 9.08% in the last quarter in 2018 to 9.54% in Q1 2019, according to Fed data.
The bill added that in 2017, “more than one million Americans defaulted on a student loan nationwide — three times the number who lost homes to foreclosure over this period.”
The bill continued: “These financial issues affect every aspect of their lives. From buying a home to choosing a career, from starting a family to saving for retirement, student debt casts a shadow that many Californians cannot escape. California is just beginning to see how this debt fuels economic, gender, and racial inequality, inhibits asset accumulation, accelerates wealth gaps, and carves out a generational divide that will take decades to erase.”
I know that a degree is important and indeed required in many fields, but (if all this is to be believed) you're mortgaging away the best years of your life struggling with this debt. And some will probably never pay it off in their lifetimes. Things had to be better in the 1980's and earlier.
"According to the Assembly Bill, California is facing a “student debt crisis,” with more than 3.7 million borrowers owing nearly $125 billion in student debt, which is about $33,000 on average.
The overall level of outstanding student debt in the U.S. stood at $1.49 trillion in the first quarter of 2019, up $29 billion from the last quarter, according to the New York Fed.
And borrowers are increasingly unable to meet repayment deadlines, with delinquency rates rising steadily from 9.08% in the last quarter in 2018 to 9.54% in Q1 2019, according to Fed data.
The bill added that in 2017, “more than one million Americans defaulted on a student loan nationwide — three times the number who lost homes to foreclosure over this period.”
The bill continued: “These financial issues affect every aspect of their lives. From buying a home to choosing a career, from starting a family to saving for retirement, student debt casts a shadow that many Californians cannot escape. California is just beginning to see how this debt fuels economic, gender, and racial inequality, inhibits asset accumulation, accelerates wealth gaps, and carves out a generational divide that will take decades to erase.”
I know that a degree is important and indeed required in many fields, but (if all this is to be believed) you're mortgaging away the best years of your life struggling with this debt. And some will probably never pay it off in their lifetimes. Things had to be better in the 1980's and earlier.
It was. I graduated in ‘96 with about $30,000 in student loans. Today in my field salaries are not much higher than they were then in my field but new grads are now $200,000 in debt for the same degree. They keep expanding requirements too, used to be bachelors for OT now it’s masters, PT used to be masters now it’s doctorate which requires that much more debt. A new grad speech therapist told me grad school was $65,000 by itself.
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