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What a bunch of morally corrupt scumbags. Question is am I talking about the Department of Education, the student loan companies, the collection agencies, or the students? This article brings to light a good deal of issues, that is for sure.
Let me guess, some of you say "lets bring back debtors prison and throw these scumbag defaulters in the slammer", right? I can promise you that some of these defaulters would go to prison for a term if it meant absolving this debt that can currently never be absolved. Heck, others might leave the country if they had a place to go. Lets just hope it's not Australia, because apparently Australia is a close ally of America and they'd never tolerate an American who had debt in the USA.
What a bunch of morally corrupt scumbags. Question is am I talking about the Department of Education, the student loan companies, the collection agencies, or the students? This article brings to light a good deal of issues, that is for sure.
Let me guess, some of you say "lets bring back debtors prison and throw these scumbag defaulters in the slammer", right? I can promise you that some of these defaulters would go to prison for a term if it meant absolving this debt that can currently never be absolved. Heck, others might leave the country if they had a place to go. Lets just hope it's not Australia, because apparently Australia is a close ally of America and they'd never tolerate an American who had debt in the USA.
The questions is why are these fools taking out enormous loans that they cannot pay back? No one is forcing them to take on loans. Banks and government are scumbags for many reasons. This is not one of them.
The questions is why are these fools taking out enormous loans that they cannot pay back? No one is forcing them to take on loans. Banks and government are scumbags for many reasons. This is not one of them.
Really? Are you sure? Why are the banks loaning such large amounts to anybody? Nobody is forcing them to. I guess they understand that if the student defaults, the government will guarantee the loan, and then allow the sharks to go collect it anyhow. Again; It was reported in January 2004 by John Hechinger (WSJ) that for every dollar paid out in default claims, the Department of Education would recover every dollar in principal, plus almost 20% in interest and fees. Further, supplemental materials in the president's 2010 budget show a recovery rate for defaulted FFELP loans of about 122 %. This is the amount recovered compared to the amount of the loan at the time of default. Compare this recovery rate to that for defaulted credit cards, which is usually about 25 cents on the dollar, and one can see that defaulted loans are clearly not costing the Department of Education money. In fact, simple, comparative analysis shows clearly that the reverse is indeed the case. In other words: The Department of Education is making more money on defaulted loans than loans which remain in good stead.
It is hugely inaccurate to report that the Department of Education gets back only 80 cents on the dollar for defaulted loans. The irrefutable evidence, and credible analysis demonstrates that the Department realizes a net profit, not loss, on defaulted (FFELP) loans.
Baked into the 80 cents figure reported in that article are costs derived from a so-called "fair value" accounting scheme, whereby the Department is pointing to a small subset of the student loan market (private loans), and using the difference in interest rates between these loans and federal loans as justification for calculating a loss for the Department. This cost is fantasy. It is not real.
Moreover: Mark Kantrowitz, who is funded largely by lending interests, or lending system beneficiaries, recently stated that even using this hugely inappropriate accounting method, the Department still realizes a profit on defaulted (FFELP) loans.
To see Him make such a blanket statement, without so much as acknowledging that there is controversy surrounding the claim is deeply troubling. There are many, real, people whose lives are being crushed by this predatory lending system.
Comparing defaulted student loan collections to typical, industry standards
Consider the case of generalized defaulted bank loans. Determine and Neto de Carvalho (2006) found that these loans incurred, on average, a recovery cost of about 2.6% of the amount recovered. So for example: to recover $122,000 in defaulted bank loan debt would cost about $3,500.
It is important to note that for general bank loans (ie home loans, car loans, property loans, etc), recovery typically involves the seizure of physical property pledged against the loan- property that must be handled, stored, and ultimately liquidated by the bank. This, combined with the various legal and administrative costs that accompany such recovery action is a significant cost that does not exist for unsecured debts, such as student loans or credit cards.
Consider that student loans are not dischargeable in bankruptcy. Nor are they subject to statutes of limitations, state usury laws, or even Fair Debt Collection Practices when the collection entity is a non-profit, government-sponsored (or government) entity. Consider further that the student lending system can take a borrowers wages, income tax returns, Social Security and Disability income, and can also put pressures on a borrower that no credit card company could bring to bear, such as termination/exclusion from public employment, denial of security clearances, exclusion from practicing in a state licensed profession through administrative suspension, and others. Credit card recovery is probably far more expensive than recovery of defaulted student loans, yet apologists for the student lending system would have us believe that the reverse its true.
These powers, and lack of consumer protections combine to show clearly that the collection costs associated with defaulted student loan recovery should be far, far less, even, than the costs associated with the recovery of defaulted credit card debt., particularly given that for decades, the federal student aid office has been managed by executives who were brought in from private industry lending companies like Sallie Mae, in order to streamline processes, control costs, and otherwise make it run "like a business".
Given that the Department recovers 22% more than it pays out on default claims, the only way the federal government could not be making money on these loans is if the collection costs incurred amounted to approximately 20% (we assume a nominal "cost of funds" allowance here).. Given that defaulted credit cards will typically see a 6-10% recovery rate, the associated collection costs for these cards has got to be significantly less than this- probably no more than 3%. Given this, and the relative difficulty and expense associated with collecting on credit cards compared to student loans, it would be virtually impossible to credibly claim that collection costs on student loans could be anywhere near 20%.
This, however, appears to be what the Department of Education would like to claim. For example, a recent article in the WSJ intimates that the government is indeed "losing money"on defaulted loans. It appears to claim that the department ultimately loses 15%, rather than gains 22%, due to collection costs. So, according to this logic (and assuming the governments cost of funds is nominal), This means that to collect $122,000 in defaulted student loan debt costs the Department of Education about $37,000, or, about 37% of the value of the loan at the time of default.
Comparing defaulted FFELP loans to non-defaulted loans.
To be thorough, let us consider this question from a slightly different basis, and consider narrowly whether a rational decisionmaker in the role of FSA would prefer a loan to default, or not. In other words, let's compare a defaulted loan to a non-defaulted loan, and see if there is a clear financial incentive to prefer one over the other from the standpoint of the Department of Education.
From the Department's perspective, an FFEL loan can either default, or remain in good stead. Given no specific details about the loan, the borrower characteristics, etc., the Department has a very simple choice to make:
1. The loan remains in good stead.
This is the simplest case, The Department pays subsidies if required during the life of the loan, and also either pays or receives "spread income" to or from the lender (this is a complicated mechanism, but generally these payments are made by the Department to the lenders). So the Department pays no default claim, and may incur interest subsidy, and generally pays a small "spread cost". To be overly generous, we will simply ignore these costs for the purpose of this analysis. So the Department, essentially, just "watches the loans go by", and there are no costs involved, nor income gained.
2. The loan defaults,
The Department must pay out principal and interest of the loan at the time of default. Assuming the government's "cost of money" is small we know that ultimately the Department recovers 122% of this original payout amount. Even if collection costs were twice that of general bank loans, this would still leave a hefty profit for the Department of Education.
So essentially, the Department is given a choice: Either do nothing and get nothing, or outlay cash with the knowledge that this outlay will realize a 22 percent return, ultimately (minus the governments cost of money and collection costs). From this perspective, it is clear that based solely on financial motivations, and without specific detailed knowledge of the loan (i.e. borrower characteristics, etc.), the chooser would clearly favor the default scenario, for not only the return, but perhaps the potential savings in subsidy payment as well,
Conclusion
It should be clear from this analysis that for many years, the Department of Education MUST have looked upon defaulted FFELP loans as a source of revenue, rather than a cost to the agency. Given a current defaulted loan portfolio of approximately $60 billion, the amount of revenue this represents to the Department of education is in the tens of billions of dollars. Claims by supporters of the Department of Education ,and by the Department of Education itself to the contrary are simply not credible.
This is critically important because fiscal concerns tend to guide and shape policy and procedures within the Federal Student Aid Office, or any government agency, for that matter. Seeing defaulted loans as a fiscally desirable outcome creates an obvious and egregious oversight conflict that, if left uncorrected, leads to behaviors that tend to hurt, rather than help the students in all areas, including providing critical, accurate information to Congress, who has ultimate authority on lending limits, and thus controls the cost of tuition by controlling these limits. Ultimately, this causes Great harm to citizens and their families.
And indeed, there is clear and obvious evidence that the Office of Federal Student Aid has, over time, adopted policies that hurt, rather than help students, There is also clear evidence that the Office of Federal Student Aid acted in such a manner (by both actions, and inactions) that ultimately led to increased borrowing, higher college prices, and a higher default rate.
At the core of this problem lies the fact that nearly all standard consumer protections have been stripped from federal student loans. Despite the rhetoric offered up by apologists for the student loan system (this includes so-called "student advocates"), federal loans have in fact, far fewer consumer protections than even private, non-federally guaranteed student loans. This has set up a predatory lending situation that simply must be corrected by returning, at a minimum, standard bankruptcy protections to all student loans. Conservatives and liberals alike must agree with this statement, and Congress must act accordingly, and immediately.
The questions is why are these fools taking out enormous loans that they cannot pay back? No one is forcing them to take on loans. Banks and government are scumbags for many reasons. This is not one of them.
I just can't believe people keep saying things like this quote above! The point is that when the loan was taken, it was truly believed that it would be paid back one day in full. I myself had never missed a payment, even though it required me to work three jobs (Vacuum Sales, Publix and Walmart), all while still going to College because my bastard of a student loan company decided that because I took a semester out that I was done with College and should start paying back my loan. I paid everything I could, and when I moved to Australia I actually sold my car, got my security deposit for my apartment and some birthday money from my parents and put it all on the loan (about $3,000), then when I tried to set up a payment plan from overseas they said they couldn't verify who I was over the phone and that I would need to visit an office of theirs. There are none here. I explained this, faxed my ssc, licence, and birth certificate, and they said they couldn't verify me. I don't have access to my online profile either as I don't know my customer number with them, and they won't give it to me. I even had my mother go and talk to them. I have contacted them many times and I can't afford to fly back to the US to deal with them in person.
So what I ask is this: Am I a deadbeat too? I have no way to repay a loan that is now over $60k, I couldn't even afford to do so if I had a way to do it, I have tried everything within my means to pay this loan, and I am now at a point where I will not be paying it back. I don't live in the US anymore, and never will again. I'm not saying that I will NEVER pay it back, honestly, if I won the lottery tomorrow, or inherited money, or something along those lines, I would pay it all back in full. It isn't a good feeling living with a debt to your name!!
Basically, the loan sharks make it VERY near impossible to pay back what you owe, and I don't see the point. The system fails people like us who try to do the right thing and end up vilified for it.
Also, just to add, I did all this despite never being able to finish my degree, I have my AA and about 2 years of college left should I ever return. Working 3 jobs while trying to study is damn hard, and again, the loans companies fail the students by forcing them in to situations like that.
Last edited by cutelittletoaster; 09-14-2012 at 05:57 AM..
Reason: I forgot to add:
Really? Are you sure? Why are the banks loaning such large amounts to anybody? Nobody is forcing them to.
Earlier:
Quote:
Originally Posted by Koochi24
If vets don't deserve loans nobody does
Either you believe in subsidized loans (government encouraging loaning to certain classes, e.g. vets, and banks giving preferential treatment and 'larger' amounts than students would normally get), or you don't. You don't get it both ways.
My gut feeling is if you really wanted to start chipping away at the loans you have, you probably could. You just don't like the terms because you feel they are unreasonable....those same terms you signed up for. If you can sleep at night with that on your conscience, hey, more power to you.
I believe in subsidised loans from the government. I do not believe in private loans that are subsidised by the government that create a predatory market that profits private enterprise and the government which I have now clearly laid out many times in this thread. I can easily sleep at night. I sleep like a baby. When I took out the loans I had no idea of the predatory nature the student loan market had just lobbied itself into at the expense of the students. Now that I do I can say eff that noise and they can go get stuffed.
And stop taking my vets deserving loans comment way out of context. I WAS SIMPLY REFERRING TO THE FACT THAT I DID NOT GO TO UNIVERSITY OUT OF HIGH SCHOOL, SO MY HIGH SCHOOL PERFORMANCE REALLY DOES NOT COUNT FOR SQUAT. I WAS A VET AND THAT SHOULD COUNT AS MUCH AS BEING A HIGH SCHOOL BRAINIAC. IN NO WAY WAS I IMPLYING THAT I AM SPECIAL BECAUSE I AM A VET, I WAS IMPLYING THAT THERE ARE OTHER PATHS ONE CAN TAKE TO SECURE LOANS FOR UNI OTHER THAN HIGH SCHOOL. Jesus, how many times must it be explained to you?
I just can't believe people keep saying things like this quote above! The point is that when the loan was taken, it was truly believed that it would be paid back one day in full. I myself had never missed a payment, even though it required me to work three jobs (Vacuum Sales, Publix and Walmart), all while still going to College because my bastard of a student loan company decided that because I took a semester out that I was done with College and should start paying back my loan. I paid everything I could, and when I moved to Australia I actually sold my car, got my security deposit for my apartment and some birthday money from my parents and put it all on the loan (about $3,000), then when I tried to set up a payment plan from overseas they said they couldn't verify who I was over the phone and that I would need to visit an office of theirs. There are none here. I explained this, faxed my ssc, licence, and birth certificate, and they said they couldn't verify me. I don't have access to my online profile either as I don't know my customer number with them, and they won't give it to me. I even had my mother go and talk to them. I have contacted them many times and I can't afford to fly back to the US to deal with them in person.
So what I ask is this: Am I a deadbeat too? I have no way to repay a loan that is now over $60k, I couldn't even afford to do so if I had a way to do it, I have tried everything within my means to pay this loan, and I am now at a point where I will not be paying it back. I don't live in the US anymore, and never will again. I'm not saying that I will NEVER pay it back, honestly, if I won the lottery tomorrow, or inherited money, or something along those lines, I would pay it all back in full. It isn't a good feeling living with a debt to your name!!
Basically, the loan sharks make it VERY near impossible to pay back what you owe, and I don't see the point. The system fails people like us who try to do the right thing and end up vilified for it.
Also, just to add, I did all this despite never being able to finish my degree, I have my AA and about 2 years of college left should I ever return. Working 3 jobs while trying to study is damn hard, and again, the loans companies fail the students by forcing them in to situations like that.
Toaster, I wouldn't sweat your energy out on these people or let them get to you. They aren't going to get the big picture until way after it is too late. And with the FED just announcing QE Infinity and pumping out 40 billion per month in un-auditable cash to the elite bankers who created this mess it's already too late. You need to look forward now. And just let the past go. This means making some big decisions. You are still in the US tax web. The US is the only country in the world that taxes based on citizenship and not residency. This means you are still required to file a US tax return every single year. Yes, for now you can claim the foreign income exclusion, but they are trying harder and harder every year to do away with that. They are also passing laws that can take your US passport away if you are not tax compliant. Also be aware of the FBAR requirements you fall under. I can not stress enough how important it is for you to stay tax compliant. The US is getting even more draconian with FATCA being implemented in 2013. It's nuts and you need to look into it.
Once you get your Australian passport you are going to have to decide if US citizenship is worth it. Because Uncle Same will take 30% of all your investments annually, whether it is property, equities, and guess what, your Super Annuation upon retirement. None of these fall under any form of foreign income exclusion. If you own mutual funds abroad it is even worse and you can say good bye to 40% of any profits on that. You will end up paying at least $1000 a year to pay someone to do all your mind boggling taxes correctly o ensure you are compliant. And you will pay on the US dollar appreciation/depreciation on property, equities, and the like so it is impossible to win. The only way out is to renounce your US citizenship. I highly recommend you look into everything I just laid out. FATCA is no joke, and FBAR is right there with it. It's scary and you need to protect yourself from this tyranny. Get out of the web as soon as you can. The Australia passport is a great one to have, and the US passport is declining in value more and more every year. Freedom is just around the corner. Best of luck, and remember, you will always be an American, just not an American Citizen.
I am interested in moving to Australia. I am from US. I like to work there as well. I like to become a citizen. When I move there, I like to be gainfully employed. I am a nurse. Do I go through a visa process? How am I allowed to work in another country? What are the basic steps to start this process? To start this move? I seen a government citizenship website thought of contact them on phone to discuss visa process.
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