Your thoughts on student loans? Constructive v. Destructive?

Question

As one who is so indebted in student loans that I can never afford to die, I wonder . . . . I won't go into my tirade about the financial industry or the spiral created by private student loan availablity or my preference for grants and fellowships, but. . . .

I heard today that Sallie Mae is fighting to sustain the subsidies given to private lenders that issue student loans. I had no idea that such subsidies existed (other than the interest-game), but I believe it.Of course, the banking industry is arguing that this will make loans less accessible to the disadvantaged, etc. BUT my question is this: wouldn't it make more sense to put that same money directly into the hands of the students that need it rather than subsidizing someone lending that money and guarantee-ing it in the event of default? Why are "we" (the government) paying banks money up front in order for the bank to turn around and lend the same money to "us" (the people)? How about putting that money into Americorps?

EsoMan -- I am so with you. I am also disgusted with the fact that schools take advantage of the fact that there is more money out there and raise the tuition and then more money becomes available . . . . and on and on. I would much rather see the money put into the schools themselves in exchange for lower tuition OR fund work in exchange for the money through Americorps, Internships, or Fellowships. If our government would just pay directly instead of offering "incentives", this world would be such a better place. If we could work to build America in exchange for tuition (like the Military Services offer, for example), what a country this could be . . . .

Answer 1

It's a good thing. In general, students are a risky loan so without subsidies, loans would be hard to get and of higher interest. Without the loans (an investment in the future), many gifted people would not benefit from higher education and all people would be negatively affected. Funding via government is not cost effective and takes a strong incentive to succeed away from the students.

Answer 2

1

Answer 3

Privatizing the student loan program has been a failure. When I first went to college, the National Direct Student Program (NDSL) was administered by the government, and the interest was substantially less. Some recipients abused the program, but that will always be true. Now the loan companies are the worst abusers. Due to the greed and usury of these institutions, many of our best students are unable to continue their education, and society as a whole suffers from the loss of their talents. I expect the government to take corrective action soon. Don't lose hope, they may lower interest rates retroactively, or even "forgive" some percentage of your total debt.
I agree that free public education would be the best long-term solution, but for some reason, the trend has been away from that in recent years.

Answer 4

Student loans are a fact of life. However, the problem lies in how unregulated the industry has become. I asked a question very similar to yours, and got a response that was very interesting. Regulating student loans would go against everything our country values: free market (AKA greed and capitalism.) The student loan industry has exploded like a dog that has broken off of its leash. What's more unsettling is that private for-profit student lenders (examples: Sallie Mae, Wells Fargo, Student Loans Xpress... need I go on?) are getting their loans "guranteed" by non-profit organizations through a loophole in the current laws. These loans are offered federal protection without having to adhere to the same repayment guidelines that Stafford Loans coming directly from the government offer (income sensitive repayment plans, flexible deferrment options, and reasonable interest rates.) Private lenders are making a KILLING off graduates. If I had my way the lending would be directly through the government only. That way, interest rates could be controlled, and more money could be funnelled into grant programs instead of stuffing the pockets of greedy CEOs. Students NEED to borrow money, but they should be offered reasonable payment plans based on income, consolidation of ALL loans (including those that are private) and help when they need it. Education should NOT just be for the elite and wealthy. However, with all of this said students should expect to have to pay back their loans. This country is not socialist in nature, and whether one agrees with it or not, they borrowed the money and are obligated to repay it. I don't think most students want to skip out on their loans, but they want to be able to repay them and still have a decent quality of life (buying a home, having children... the American dream type of stuff.) If their student loan payments/debt are so outrageous that they cannot do that... well then getting an education tends to seem rather futile, right? My thoughts on this entire debacle is that things are only going to get worse before they get better. Congress is starting to realize that it is a problem. Get involved! Write your congress person and senator with your thoughts. That is the beauty of being in America. We CAN make change, slowly but surely. On a forlorn note... if things do not change higher education is going to start to crumble.

Answer 5

I don't think that a person should have to borrow money to pay for college. The State Colleges should not charge residents of that State.

It is almost as important these days as a high school degree was years ago.

It is unfair for a college to get paid higher tuition because there are too many students and that there are funds available to loan certain people. The simple answer would be to easy - build more schools.

It is unfair for a college to apply part of the tuition that it receives from one student to cover the expenses of another student in the form of scholarships.

I know a person who spent four years in college and is starting her working career $140,000 in debt. That is just plain UNFAIR.

I hear that Princeton has so many assets that if they wanted they could afford to go for two years without charging a dime for tuition. The colleges are just another big business industry.

Answer 6

In some cases it is like signing a deal with the devil. They will own you for the rest of your life, because they control your credit score And since the loans are under the guise of a government loan, you can never get relief from them from bankruptcy. Even though by the time the actual loan has been paid you will have paid over 5 times the amount borrowed. They sell the debt to collectors over and over and over again, and the law allows them to do that. It is legalized racketeering.

Answer 7

I agree with you. I get so fed up trying to get student loans caught up, and payments are so outrageous. If you are in default, and have Earned Income Credit for children you claim on tax returns, the lender then takes it all. Which is not fair to our children. I am one who would spend the money on my children for things that are needed.

Answer 8

Student Loan Scam
http://www.townhall.com/columnists/RobertDNovak/2007/01/22/student_loan_scam

Democrats last Wednesday were extolling their student loan bill for opening college to modest-income Americans when Rep. Tom Price, a second-term Republican from Georgia, took the House floor. "If only this bill did what they say," Price declared. His admonition constituted more than the usual hyperbole of congressional debate.

The bill, passed by an overwhelming bipartisan House vote, was headlined as reducing the interest on federally subsidized student loans from the present 6.8 percent to 3.4 percent. Actually, it gradually reaches the 3.4 percent level on July 1, 2011. A student taking out a loan July 1 this year would pay 6.12 percent after graduation. Only 29 percent of all students getting loans would be eligible for this gradual cut. Other student loan programs will be cut to help pay for the $7 billion cost over five years. And, contrary to Democratic implications, the bill does nothing to slow skyrocketing college tuition.

Such details are obscured, however, by the brilliant success of House Speaker Nancy Pelosi's "first 100 hours." The student loan bill is one of the politically popular measures rushed through opening days of the first Democratic-controlled House session in 12 years -- without hearings, without committee authorization and without meaningful debate. While Democratic support has been unanimous, Republicans are divided and listless.

In contrast to ideologically diverse Democrats who controlled Congress in the past, today's House majority members look like automatons not only in the way they look but how they talk. The hand of Rep. Rahm Emanuel, chairman of the House Democratic Caucus, was apparent as Democrats newly elected under his chairmanship took the floor to deliver nearly identical speeches of how this bill will help poor students.

Rep. Ed Perlmutter, who won a previously Republican-held district in Colorado, in his floor speech used the now-common anonymous anecdote. He told of seeing "a woman whose kids have gone to school with mine" at a swim meet in Arvada, Colo. "She told me that one of her kids is in college now, and she has another that will be going in a couple of years. She is a single mom, and her kids have done well in school, but the cost of college has become prohibitive for their entire family. She said her kids have been excellent students, but she was fearful they could not get into college and be able to pay for it."

Perlmutter added that this "single mom" thanked him for this bill changing "the cost of higher education." In fact, it has nothing to do with the prohibitive cost of college. It will have no effect whatever on her child now in college. If her second child is literally enrolling in a couple of years (January 2009), the interest rate would be 4.76 percent, to be paid after the student leaves college. The mom may have thanked Perlmutter too soon.

Because Democrats are now committed to "pay-go" (offsetting all spending increases), this bill means cutting $6 billion from other federally subsidized student loan programs on top of a net $12 billion cut by the last Republican-controlled Congress.

On the eve of last Wednesday's House debate, the Consumer Bankers Assn. and the Financial Services Roundtable sent a joint letter to members of Congress. The offset cuts in loan funding, the organizations warned, "cannot be absorbed by the nation's loan providers without compromising the kinds of benefits and services now provided to college students and their families."

This warning was not be expected to impact heady Democrats, but might should have promoted among Republicans. It did not. While Democrats were 232 to 0 for the bill, only 71 Republicans followed their leadership to vote against it. The 124 Republicans voting aye included such erstwhile conservative stalwarts as Todd Akin (Mo.), Virgil Goode (Va.), Chip Pickering (Miss.), Joe Pitts (Pa.), Dana Rohrabacher (Calif.), Ed Royce (Calif.) and Todd Tiahrt (Kan.).

The once militant, united House Republicans are demoralized and on the run. They were battered in the last campaign for cutting school loans in the previous Congress and are willing to go along with a sham bill, hoping for Senate gridlock and a presidential veto.

Destructive impact of student loans
http://www.scoop.co.nz/mason/stories/ED0411/S00016.htm

Alleged Fraud at Sallie Mae & Student Loan Xpress: Paid Recommendations for Best Student Loans Provider
http://www.seobook.com/archives/002155.shtml