Obama to Announce Student Loan Relief Plan

A politician appears to be bribing his constituents with other people's money.

I hope this idea doesn't catch on because it could lead to irresponsible government spending.

I thank you for the thoughtful response, but I have a couple points of disagreement.

Kandahar said:

This is true, but is a different issue. Personally I think that our government should end the practice of loaning however much money students need for the full tuition at private schools. They could start by saying that, say, $40K is the maximum that students can borrow per year for college, then gradually cut that number back until it's more in line with what students pay at a state school. Not that I'm against federal assistance for students at private schools...but at most they should be eligible for loans for 150-200% the cost of a state school IMO. This would encourage private schools to cut their tuition back to more reasonable levels.

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I agree on all of the above in concept. Some students need to be compelled to make the tougher choices. As we are now seeing, too many took all the money they could get, for all the education they wanted, and now are finding out it was a mistake. I paid off all my loans long ago, btw.

Nevertheless, the debt overhang from student loans that currently exists still poses a major economic problem for our country, for the same reason that the mortgage debt overhang does. If a person's income goes disproportionately to paying off debts, then they have less money to spend on things that will grow the economy. We need some sort of solution in place for them.

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Here i greatly disagree. The option is not to pay one's debt, or grow the economy. Defaulting on a loan hurts the economy far more than any benefit from spending the money elswhere. The cost of others paying your $50K default is far greater than any benefit they gain by your spending the $50K in lieu of paying your debt.

It's not. In fact, it's LESS forgivable under the current system. Every other type of debt will be wiped out if a person declares bankruptcy, but not student debt. That stays with a person for their entire life until it's paid off. This is grossly unfair, and flies in the face of the whole reason that we have bankruptcy protection in this country. The only reason this exception exists is because the student loan companies lobbied for it.

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Yes, but that ignores the fact that one reason college loans were as accessable as they have been is precisely because of the bankruptcy exception. There is nothing at all unfair about it. It was a clear and understood provision of the loan. In similar sized large loans, such as a mortgage, you stop paying, at least the lender gets the house back. What colateral is there to loan some kid $200K ? Your notion of "unfairness" is a liberal thing, btw.

There are two separate problems here, that require two separate solutions. The first is the skyrocketing cost of an education, for which I agree with your assessment. The second is the debt crisis which still infects our economy, for which some sort of relief will be necessary.

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Agreed that we need to realize there is a big problem here. We can anticipate it, draft out numbers, and then a best solution. However, DC seems to fail miserably at getting in front of such problems, as demonstrated by what Obama has done here. It is not dissimilar to the housing bubble.

To break just a bit off topic, but things such as this are one reason folks gyrated towards such as Chris Christie for President. He seems to be able to communicate the problems to the here-and-now very well. Whether simply being unafraid to be "in your face" is all it is, or its some incredible secret political talent, many folks responded to it. There is a growing swell that do not want the can kicked anymore. I do not believe Obama wants anything to do with that process. I believe he fully understands that the way to diminish capitalism, and make us a social nanny state, is first and foremost to sink us all in debt. Its Alinsky 101, and it is exactly what he is doing.

Eighty Deuce said:

So it would seem that I extended the Fountain of Youth to you for a moment

One reason that the cost of education has skyrocketed is precisely because of access to student loans.



This growing notion among those debtors that they should not be obligated for full repayment is absurd ! Why is their debt any more forgiveable than any other citizen's ? As I have noted, Obama taking these actions will only make all things worse, as he is fueling the bubble, creating moral hazards, and teeing up the economy for an even bigger hit.

The way to drive down the price of education would be stop giving out student loans like candy, and certainly not forgive the debt, ie. shift it to other taxpayers.

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You can stop loaning now. True. And it may help in the future. There will be however less graduates. Cost will not drop that much. It can't drop that much.

But you still have those loans out there now that won't be paid.

Objective Voice said:

The loans ARE NOT forgiven.

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From one of you links:

•25-YEAR CANCELLATION — If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be canceled.

And I understand BHO has further changed this to 20 years. Is 'canceled' synonymous with 'forgiven'?

Dickieboy said:

From one of you links:

•25-YEAR CANCELLATION — If you repay under the IBR plan for 25 years and meet certain other requirements, any remaining balance will be canceled.

And I understand BHO has further changed this to 20 years. Is 'canceled' synonymous with 'forgiven'?

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If you've paid for 20-25 years, what eactly is there to forgive or cancel?

Objective Voice said:

Everyone of you who are critisizing the President's college loan repayment plan have it WRONG! It's not more federal spending; it's not even a discount. It's a reduction in the out-of-pocket payments college student pay directly toward their federally guaranteed student loan.

The loans ARE NOT forgiven. Those who borrowed the money will still have to pay it back only instead of making payments at the higher repayment amount including interest, the President has instead taken a program that's already written into law* (I'll have to do more research to find the exact piece of legislation that covers this) that allows students to instead pay up to 10% of their "discretionary income" to pay off their loan. In other words, repayment is based moreso on how much money the student makes vice a set repayment amount like, for example, a home mortgage.

Example:

$10,000 loan

$500/wk income

10% of 500 = $50

So, if your repayment was $250/month you save $50 per month on your loan repayment. However, if on the other hand your repayment was $150/month, you might have to pay an additional $50 per month. Of course, there's also loan deferments.

Bottom Line: Some student will benefit from the repayment measure (and I have to assume there will be many who qualify since most live on Ramen noodle diets and work part-time jobs to help pay for college and). Others may not, but it's a step in the right direction and it won't cost the government one dime of taxpayer money.

To learn more about the President's college student loan repayment plan, go to:

We Can't Wait to Help America's Graduates; or,

Press Release: "Remarks by the President on College Affordability" (President's speech in Denver, CO on October 26, 2011)

You can also learn more about the President's proposal and use the repayment calculator on the Federal Student Aide website to see if your revised repayment amount under the plan would provide you with savings.

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It is not that simple. You are correct that much of this is already law, scheduled to start kicking in in 2014. The President has moved it up two years, and apparently made some other changes.

Here is an example of the potential cost.

Borrow $250K for a 4 year degree. Be single, and take a job where your after-tax net is $50K. Your poverty line is $10K. You have $40K to target, so your 10% payment is $4K, for 20 years. That's $80K in total payments. That's taxpayers eating $170K of principal on your education choices. The inflation of your income would be offset by no calculation for interest.

Under the prior plan, which was also part of the problem, the above example would be $6k paid per year for 25 years, or $150K, and the taxpayers eat $100K, not $170 K.

The new plan took a moral hazard, which has been a big part of this education inflation bubble, and made it worse. Obama moved it up two years to buy votes. And made it worse again.

Boo Radley said:

If you've paid for 20-25 years, what eactly is there to forgive or cancel?

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See my above post.

Boo Radley said:

If you've paid for 20-25 years, what eactly is there to forgive or cancel?

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Wasn't it obvious? The excerpt indicated ‘remaining balance’. What is ambiguous?

Dickieboy said:

Wasn't it obvious? The excerpt indicated ‘remaining balance’. What is ambiguous?

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I'm saying there would not likely be a remaining balance. Certainly not one to scare anyone.

Eighty Deuce said:

See my above post.

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It doesn't answer the question. if you've paid on the loan for 20-25 years, you likley don't have a balance. And he seems to be speaking of interest lost, and not necessarily prinicple.

Boo Radley said:

I'm saying there would not likely be a remaining balance. Certainly not one to scare anyone.

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Some people take on obscene amounts of debt and then aren't able to get a decent job to pay it off. Personally I have $150K in student debt. I have to pay $1,600 toward my loans each month...and that's if I make the minimum payment; usually I try to pay more than that. Fortunately I was able to land a job that will make it worth it (assuming I don't get laid off in the next couple years)...but there are lots of students who aren't so lucky. Some finish school with $150K or $200K and can't get a decent job due to the horrible economic conditions. For those students, there could definitely be a balance left even after 20-25 years.

Kandahar said:

Some people take on obscene amounts of debt and then aren't able to get a decent job to pay it off. Personally I have $150K in student debt. I have to pay $1,600 toward my loans each month...and that's if I make the minimum payment; usually I try to pay more than that. Fortunately I was able to land a job that will make it worth it (assuming I don't get laid off in the next couple years)...but there are lots of students who aren't so lucky. Some finish school with $150K or $200K and can't get a decent job due to the horrible economic conditions. For those students, there could definitely be a balance left even after 20-25 years.

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Not if they are paying the minimum, and that is what was suggested, that they paid for 20-25 years. The minimum is designed to have it paid off in a time, 20 years I think.

The standard repayment term for this loan is 10 years. You may be able to extend repayment by deferring Stafford Loans or Stafford Loan Consolidation.

(snip)

•The Extended Repayment Plan is for borrowers with FFELP loans totaling more than $30,000. This plan offers a choice of fixed or graduated payments over a period of up to 25 years.


Stafford Loan Frequently Asked Questions < Stafford Loan Information | StaffordLoan.com

So, while I may not know or understand everything, 25 years seems to be the max. So if you're paid for 25 years, what could be left. Even 20 years might mean there is nothing left either, depending on circumstance.

Boo Radley said:

The standard repayment term for this loan is 10 years. You may be able to extend repayment by deferring Stafford Loans or Stafford Loan Consolidation.

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But the Stafford Loan program is part of the 'William D. Ford Federal Direct Loan (Direct Loan) Program' in which 'students borrow directly from the U.S. Department of Education (the Department) at participating schools'. From the Federal Student Aid program:

Repayment Plans—The Direct Loan Program offers several repayment plans that are designed to meet the different needs of individual borrowers. Generally, you’ll have 10 to 25 years to repay your loan, depending on the repayment plan that you choose.

No mention of 'standard' or 'extended'.

Boo Radley said:

Stafford Loan Frequently Asked Questions < Stafford Loan Information | StaffordLoan.com

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I'm sorry...disregard the previous post. The link you furnished was not relevent to this discusion. Per the disclaimer at the bottom of the page 'Stafford Loan dot com is not a United States Government website or associated in any way with the William D. Ford Federal Direct Loan Program, the U.S. Department of Education or Federal Student Aid.' My oversight.

Hence it is not affected by BHO's plan.

KevinKohler said:

Listen, bub, I wouldn't BE in this position if certain people hadn't committed certain crimes, both in washington, and on wallstreet.

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Yeah yeah yeah, it's not your fault, you['re a victim, woes you. I was unemployed for nine months last year into this. I didn't take a single handout, my wife and I lived off her paycheck and made huge cuts in what we were doing till I landed a job, I just got a raise, life is turning around.

KevinKohler said:

That's my point. Some shady men made some illegal, shady deals, both representatives, and private business, and THAT is what got all of this started. I was doing JUST fine before the crash. So yeah, when someone comes along and STEALS your lively hood, you have recourse. But if someone comes along and steals MILLIONS of people's lively hood, we have NO recourse. Get it? In that respect, again, I'm not trying to apply legal FORCE to anyone, I just want a tiny ****ing god damn SHRED of common ****ing since to permiate the thick ****ing skulls of some of the dumb bastards around here.

Of COURSE, I'm not referring to YOU.

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We have common sense, we also realize that life, isn't fair. I have compassion for your situation, it sucks, but crying about it doesn't solve anything, demanding that you get a to steal from others so your life is a little better makes you better then the "criminals" you are complaining about how again?

SheWolf said:

The principle on my debt is over 60,000 and the interest makes it nearly 100,000... and I have a masters in accounting. ****. I could own a house for this amount of debt. I am in my 20s, not married, no kids, and being in this situation sucks, especially with the ****ty job market. I am not going to be able to afford buying a home or even having kids for years. I really do think the cost of our education is unbelievably high and ridiculous, and it should be addressed. I'd love to see the political discussion shift to this issue for once.

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Obama maing all student loans through the Fed isn't helping the cost of tuition.

MrVicchio said:

Yeah yeah yeah, it's not your fault, you['re a victim, woes you. I was unemployed for nine months last year into this. I didn't take a single handout, my wife and I lived off her paycheck and made huge cuts in what we were doing till I landed a job, I just got a raise, life is turning around.

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Not everyone has a sugar mama to mooch off of for nine months.

We have common sense, we also realize that life, isn't fair. I have compassion for your situation, it sucks, but crying about it doesn't solve anything, demanding that you get a to steal from others so your life is a little better makes you better then the "criminals" you are complaining about how again?

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I like the qualifier that you have compassion right before you prove that that isn't the case. In any event, it's not really about compassion (although that aspect should not be overlooked). It's about the fact that our economy cannot truly start growing again until we do something about debt overhang. Remember that this isn't an ordinary recession, it's a fundamentally different animal because it involved a financial crisis caused by too much debt. And until we resolve that fundamental problem by helping people deleverage, economic growth will continue to be stagnant. Sure, we might get a brief spurt of economic growth followed by another dip into recession here and there, but on the whole the economy will not grow very much until people deleverage some of their debt.

Boo Radley said:

It doesn't answer the question. if you've paid on the loan for 20-25 years, you likley don't have a balance. And he seems to be speaking of interest lost, and not necessarily prinicple.

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That is pure assumption on your part, and flies in the face of current evidence, and pretty simple logic.

We have climbing tuition. Four years in a private college can easily cost over $200K. We have already provided mathematical models to show where it is not repaid.

More importantly, we have created the moral hazard. Once someone knows that their repayment is capped at 10% of income after taxes above the poverty line, there is no incentive to not become an education pig. It is essentially no different than someone who bought a house in 2005, but did not have to worry about whether they could afford it, as they assumed its value would keep going up, and they could take second mortgages, or sell for a profit, and therefore felt they were not exposed to the consequences of their bad financial decisions.

Eighty Deuce said:

Then you apparently lack the intellect to know the difference between debt forgiven, ie. paid for by someone else, and a "discount".

Libs. :roll:

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No, I understand what "debt forgiven" means. I also understand that, as you said, people are required to pay back 10% of their loans before it's forgiven. Again, that's a discount, that's not free. But you probably already realized that since you decided to rely on personal attacks rather than substance.

Jryan said:

No what is stupid is the price to get those degrees. So you think everyone should get a degree to be a lawyer, that way they can pay off their student loans. Insanity...

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Perhaps we should look at the salaries of all those professors.

Your Star said:

You only see it as a blatant bribe for votes because you don't like him.

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It's not a bribe. It's bailout. Either way, it's political pandering with my money.

I support our youth and the future of this nation, so I support this plan.

With all of the money we've spent on wars since 2000, we could have paid off the nation's tuition debt and ensured that our most skilled and educated rise to their potential.

It's about time that the government showed some sense of social priorities.

apdst said:

Perhaps we should look at the salaries of all those professors.

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Did a quick refresh and saw this. I'm studying for a test that I have tomorrow, but I felt this needed to be answered.

"States are paying less of the cost than they used to," Baum says. She adds that as state budgets shrink, the students' share of paying for education goes up.

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Hmmmm... States paying less of the cost for educations.

Terry Hartle of the American Council on Education says that's because schools are paying more for talent.

"Now we're competing in a global economy," Hartle says, "so if you want to get the best scientists, the best engineers ... you're literally competing with universities and employers from around the globe."

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Capitalism has its downfalls.

Richard Vedder, who runs the Center for College Affordability and Productivity, says the more government aid goes up, the more tuition rises. He says limits on grants and loan subsidies would cap spiraling tuition prices.

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I guess government grants has its downfalls. The more people who have grants, the more the college can raise tuition. If a business knows its customer has access to money, would they not raise prices? Again, capitalism at its worst.

The problem is compounded because people are less able to pay. Incomes are stagnant, some parents are unemployed, and many can no longer get low-interest home-equity loans because home values have fallen.

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Looks like another system that is screwed and rigged for the rich.

Source: Why Is College So Expensive? : NPR

Your Star said:

Going to school is irresponsible?

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No, but getting so far into debt tht you can't pay for it and have to beg the government to bail you out, is.

Temporal said:

I support our youth and the future of this nation, so I support this plan.

With all of the money we've spent on wars since 2000, we could have paid off the nation's tuition debt and ensured that our most skilled and educated rise to their potential.

It's about time that the government showed some sense of social priorities.

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Anyone that can't figure out a way to off his student loans isn't going to make in the real world, anyway.