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And the problem with private loans has been that the private banks have been acting like loan sharks, obscuring from students how much the payments would be once they graduate, and not disclosing details that students need to know in order to compare different loans offered and make the best decision. This is why the gov't is involved. If private lenders could be trusted, it wouldn't be necessary to provide an alternative. But they've proven themselves untrustworthy.
I'm sorry, but this ignores the facts.
First thing's first. As someone who has worked with a lot of banks of all sizes and descriptions, I can tell you that they do NOT make money off student loans. In fact, the exact opposite is true. If they did, large banks such as Citi, Wells Fargo, etc., would not have discontinued offering them. With the loan rates typically below the Federal Reserve prime rate, student loans instead have been gigantic money losers. Instead, student loans are considered to be loss leaders that are offered for the convenience of parents sending children to college.
Second, the fact that student loans are no longer subject to bankruptcy has a great deal with the staggering default rates of the early 90s. During that time, student loans rates were running close to 20%. When you realize that a well-run bank makes a grand Return On Asset of approximately 1.25%, this is a huge and unacceptable loss.
A lot of them cannot make enough money to pay back their loans and many now cannot find employment in the their field of study.
Government loans should be limited to those that pursue degrees in needed job skills.
I think anyone with a C average should be allowed to get a loan because high school is not college and motivation can vary.
The government is suppose to decide which fields of study are worthy?
That smacks of big brother and totalitarianism.
And not only that, but many students change their field of study mid-stream. Individual rights are what is important. As long as the funds are going to be paid back through income tax refunds, what business is it of government to decide what field is worthy? Since anyone can be more competent than another, then anyone should be able to study whatever they want.
And the scenario being described is not characteristic of a free society.
Such a proposal would never be passed by Congress.
That's why they get elected, so that they can get re-elected by making wise decisions.
Proposing to limit the freedom to take out educational loans in the United States is not the wise route to take.
The loans are the resources of the people, and how they are accessed is a matter for elections to decide.
Middle class parents generally wouldn't vote for candidates who are so short-sighted that they would try to make radical changes to a successful educational loan system that has been well proven to open doors to opportunity.
The more education that a person has, the greater likelihood that their earning power will exceed those who are less educated and didn't attend college.
A friend of mine works for a prominent accounting firm that audits a major state research university in the Pacific Northwest. Tuition hikes in recent years at public schools are just being made to cover costs. Costs are rising because the states and other government entities are cutting funding to universities in order to balance their budgets.
Now, I will concede that universities probably have too many "extra" costs. But that's something that's probably been slowly building up over the years as schools become more elaborate and expensive.
One other issue is the amount of classes required for graduation. While being well rounded is all well and good, it's costing kids billions of dollars and creating a ton of debt. I took 120 credits towards my engineering degree. I probably could have done without 40 of them (psychology, history [which was just a rehash of high school], etc.)
The government is suppose to decide which fields of study are worthy?
That smacks of big brother and totalitarianism.
And not only that, but many students change their field of study mid-stream. Individual rights are what is important. As long as the funds are going to be paid back through income tax refunds, what business is it of government to decide what field is worthy? Since anyone can be more competent than another, then anyone should be able to study whatever they want.
And the scenario being described is not characteristic of a free society.
Such a proposal would never be passed by Congress.
That's why they get elected, so that they can get re-elected by making wise decisions.
Proposing to limit the freedom to take out educational loans in the United States is not the wise route to take.
The loans are the resources of the people, and how they are accessed is a matter for elections to decide.
Middle class parents generally wouldn't vote for candidates who are so short-sighted that they would try to make radical changes to a successful educational loan system that has been well proven to open doors to opportunity.
The more education that a person has, the greater likelihood that their earning power will exceed those who are less educated and didn't attend college.
Getting a student loan to attend a private university is akin to buying a small home at age 18 that has no resale value.
"Second, the fact that student loans are no longer subject to bankruptcy has a great deal with the staggering default rates of the early 90s. During that time, student loans rates were running close to 20%. When you realize that a well-run bank makes a grand Return On Asset of approximately 1.25%, this is a huge and unacceptable loss."
Where is your proof? This was one of the urban myths that was promoted in order to take away bankruptcy protection from student loans, but nowhere have I read what you posted as being true. Funny thing is that we're going to see this level of default rates with student loans, probably at that rate now, if you consider those students who no longer have the ability to defer default after two years. Unis have been fudging about default rates of their students for awhile now, in many cases, only reporting of default rates of those that graduated within the last two years. If we begin to extend that time line, the numbers explode. Yeah, how has that lack of bankruptcy protection worked out for yasss????
Banks made money on student loans when they sold them off to Wall Street investment houses in order to have them packaged them up into SLABS, or Student Loan Asset Backed Securities. You didn't mention that in your post, the real money came when they could sell them off, ala RE mortgages of all manners and kind. Banks didn't administer those loans, they didn't want to have to deal with the costs, when all they had to do was to collateralize them and continue the daisy chain. If student loans were such money losers, please explain why they now top over $1 trillion dollars? Of course now those banks that you mentioned wanted to get out of them, they realize that it's going to be much, much harder to bundle them off and continue that cycle. If you want a template of how things really work, all one has to do is to see how RE loans were treated.WS/banks claimed that the bundled up mortgages were "safe" because they somehow could remove risk if they bundled them up properly. They then got credit rating agencies to give those collateralized assets the highest debt ratings, though now we know that they were lying about the risk. Nothing different about student loans and fewer institutions are willing to buy them, realizing that the student loan bubble is going to burst.
Students must pay loans. However, additional requirements should be added so that the student is made to understand to fully evaluate his/her choice in the type of degree or training to avoid a worthless degree. It is fraud to direct students to follow their heart (interest) when a loan must be made and future earnings will not allow reasonable repayment of the loan.
"Second, the fact that student loans are no longer subject to bankruptcy has a great deal with the staggering default rates of the early 90s. During that time, student loans rates were running close to 20%. When you realize that a well-run bank makes a grand Return On Asset of approximately 1.25%, this is a huge and unacceptable loss."
Where is your proof? This was one of the urban myths that was promoted in order to take away bankruptcy protection from student loans, but nowhere have I read what you posted as being true. Funny thing is that we're going to see this level of default rates with student loans, probably at that rate now, if you consider those students who no longer have the ability to defer default after two years. Unis have been fudging about default rates of their students for awhile now, in many cases, only reporting of default rates of those that graduated within the last two years. If we begin to extend that time line, the numbers explode. Yeah, how has that lack of bankruptcy protection worked out for yasss????
Banks made money on student loans when they sold them off to Wall Street investment houses in order to have them packaged them up into SLABS, or Student Loan Asset Backed Securities. You didn't mention that in your post, the real money came when they could sell them off, ala RE mortgages of all manners and kind. Banks didn't administer those loans, they didn't want to have to deal with the costs, when all they had to do was to collateralize them and continue the daisy chain. If student loans were such money losers, please explain why they now top over $1 trillion dollars? Of course now those banks that you mentioned wanted to get out of them, they realize that it's going to be much, much harder to bundle them off and continue that cycle. If you want a template of how things really work, all one has to do is to see how RE loans were treated.WS/banks claimed that the bundled up mortgages were "safe" because they somehow could remove risk if they bundled them up properly. They then got credit rating agencies to give those collateralized assets the highest debt ratings, though now we know that they were lying about the risk. Nothing different about student loans and fewer institutions are willing to buy them, realizing that the student loan bubble is going to burst.
My proof? Hell, I have worked closely with the industry for decades. And you seem to not understand that the amount of a loan has nothing to do with the profitability of the loan. I've worked with every kind of bank from the local credit union up to the super regional and I have never, ever seen a bank executive say, "Oh, hey, let's go after student loans." Why? They are misery to underwrite, hell to collect on, have a lower yield, and general require far, far more paperwork on the front end than just about any other kind of financial instrument. Add to that a 2011 default rate of 13.8% -- right there with non-conforming mortgage rates, and it's just not a loan any banker in his right mind goes after. Hey, maybe you're talking about the private institutions such as the University of Phoenix, but if you're talking about your hometown bank, no way. I have seen the balance sheets myself.
Seems about as goofy as the Corporate Health Insurance nonsense.
Create a crisis, and then a bad solution.
Why not cut the price of school?
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