Opinion of Obama's new student loan relief program?

[Sbane]

http://www.msnbc.msn.com/id/45039424/ns/politics-white_house/t/obama-announces-student-loan-relief/#.Tq2oE7KyDzo

The two biggest things would be forgiving loans after 20 years of monthly repayments (25 years currently) and lowering the amount you need to pay to 10% of your annual discretionary income from 15%. Read the rest in the article.

The first is definitely a good idea, not so sure about the second.

I guess my initial reaction would be opposite yours, in the sense that the second idea sounds better than the first.

Why is that? I think you have to make twenty years of payments first...so it only helps if you are stuck in low income jobs even though you have debts approaching 6 figures. Though I could be wrong about that.

The second part just makes the first part more likely. Does that make any sense?

[LastVoter]

http://www.msnbc.msn.com/id/45039424/ns/politics-white_house/t/obama-announces-student-loan-relief/#.Tq2oE7KyDzo

The two biggest things would be forgiving loans after 20 years of monthly repayments (25 years currently) and lowering the amount you need to pay to 10% of your annual discretionary income from 15%. Read the rest in the article.

The first is definitely a good idea, not so sure about the second.

I guess my initial reaction would be opposite yours, in the sense that the second idea sounds better than the first.

But they're both bad ideas.  All of this drives up education costs.  Faculty bitch and moan about "administration creep" and the like.  And, to be fair, there's some validity in that.  Higher education has outpaced the CPI and is one of the few sectors that outpaces even medical care.  And some of that is due to increased administrative costs.  But I think I'm with Ron Paul on this.  If the government acts as a guarantor of the tuition, then why not jack it up?  

Better we socialize state schools.  Give everyone who makes a certain effort in high school a taxpayer-funded college education.  Sure, good private can and will still exist.  And thrive.  But do away with the yoke of debt for state university students who put forth the effort.  Kill about five birds with one stone.

That would certainly make more sense than paying an escalating share of debt. Of course you'd still have the problem of college degrees diminishing in worth under such a policy but it would definitely be preferable to the status quo... But the states would still be the ones deciding whether or not it was worth it anyway.

Hardly. Most people that passed the bare minimum in high school move onto to college or community college. Not much would change from the status quo except it would make people bear their college tuition cost over their entire life in form of taxes rather at a certain point where it's a lot harder(parents or kids that just graduate and don't have much of an income).

[🐒Gods of Prosperity🔱🐲💸]

Oh yeah, this is how it'll be paid for, and still leave lots of profits for middlemen CEOs.
As of July 1, 2012, even the subsidized loan rates are going up to 6.8%.

Also, that debt ceiling capitulation from Obama a few months ago removed 2 different things effective that date
1. Interest on subsidized loans will no longer be paid for grad students
2. Grad students will no longer be able to get subsidized loans.

I don't understand the logic in that at all.  Grad/Professional degrees have a much better return on investment than bachelors.

[krazen1211]

Making a lower 10% payment rather than a 15% payment means you're accumulating more interest, and possibly pay more through the life of the loan.

Good for the financially ignorant, though.

[krazen1211]

I support this plan, but I'd also like to see some more analysis on why education costs are rising so rapidly in the first place.

The real price of tuition at Harvard University was stagnant from 1900 to about 1947. Government money and government fueled demand has naturally led to massive price increases, starting with the GI bill.

[angus]

Why is that?

Well, I can't say I read the article.  But I have heard of this.  Highlights on TV and in the WSJ.  And from what you posted.  Your first idea encourages a land of welchers.  It sets a bad precedent.  It says, borrow now, pay, or don't pay, later.  It's deeply rooted in our society that it's okay to be a nation of debters, and now we're adding to that that we should be a society of debters who don't make good on our debts. 

The second just says, if I understand it correctly, we know you're broke right now, so we're gonna forebear you a bit.  Maybe hold off.  We're a nation of debters, but by god we're not a nation of debters--or of sharks, for that matter--so why not just take a moment or two to get your house in order, take a breath, earn enough to pay the bills, and maybe even enough to take a trip to the caribbean and relax a little, but don't forget who brung you to the dance in the first place.

Still, in any case, it's all bad mojo.  And yes, the second part does make the first part more likely.  That's all the more reason not to like it.  If you think folks ought to be educated, then educate them.  Raise the revenue the same way as you would for high school or elementary school.  Banks could still make loans for those that get into $60000 per year private universities, and they're private deals that oughtn't to have anything to do with the government anyway, but if we're really in a model in which we expect 30 percent or more of our high school grads to complete a four-year university track, no matter their social class, then we ought to plan for it.  And creating a plan that both increases tuition for everyone (and simultaneously encourages welching) isn't really in the best interests of the society in the long run. 

That's just my initial impression.  As I posted elsewhere, I'm open to suggestion, even at my age.  But I've actually thought this one through a little bit even before I'd read your original post.

By the way, I'm not a collectivist or a Confucianist or a communist by any stretch, but I am a pragmatist.  And I'm a huge fan of good public education.  And I have a record of departing from the republicans/libertarians, at least on education issues, more often than not.

Some confucianism that I like:

"If you plan is for one year, plant rice; If you plan is for ten years, plant trees; If your plan is for a hundred years, educate your children."


A modern Chinese saying, told often among the Chinese, that I like even more:

"If a chinese person has three dollars, he'll spend one and save two.  If an American has three dollars, he'll borrow three dollars and spend six."

[phk]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

[Sbane]

Making a lower 10% payment rather than a 15% payment means you're accumulating more interest, and possibly pay more through the life of the loan.

Exactly. It's still in your best interest to pay off your loans as soon as possible. Unless you are an idiot.

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

As horrible as that sounds, I would support a version of this.

[Wonkish1]

Oh yeah, this is how it'll be paid for, and still leave lots of profits for middlemen CEOs.
As of July 1, 2012, even the subsidized loan rates are going up to 6.8%.

Also, that debt ceiling capitulation from Obama a few months ago removed 2 different things effective that date
1. Interest on subsidized loans will no longer be paid for grad students
2. Grad students will no longer be able to get subsidized loans.

I don't understand the logic in that at all.  Grad/Professional degrees have a much better return on investment than bachelors.

Well I guess if your goal is "fairness" than it makes sense why you would cut off a higher return degree instead of the lower one.

[Okay, maybe Mike Johnson is a competent parliamentarian.]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

It could be fixed but we need to ask ourselves if we would really be able to live with being the kind of society that does things like that.

[LastVoter]

The government could have also tried to solve the supply problem. It's pretty obvious there is one, from the rise of for-profit Colleges(voodoo colleges). It could have also altered the supply of degrees towards useful degrees and away from liberal arts, and forcing universities to set higher standards for liberal arts admits. Here at UW most engineering and buisness programs require undergrad 3.0 to 3.5 gpa's to be admitted into them. Liberal arts degrees don't have any prerequisites. Building more state colleges during the second wave of college population growth could have solved the problem.
http://nces.ed.gov/fastfacts/display.asp?id=98

[angus]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

A valid philosophy, grasshopper.  Not one that I share, though.  

I pay about 4000 per year in property taxes to support the K-12 schools, but all I get for that expenditure is 600 graduates every year who are capable of operating the cash registers at the local Wal-Mart.  If it's just dollar-for-dollar that we're after, then stop there, because it's worth about 4000 dollars per year for me to have the satisfaction of knowing that every time I walk into a Wal-Mart, or a Barnes'n'Noble, or a McDonalds, that the person behind the register will be able to transact with me, in a matter of seconds, and serve me what I need.  

But I expect more than that.  I guess I'm with Nathan on this aspect of the question.  Education, in my opinion, is an end in itself.  Not a means to an end.  And, as an egalitarian, I have to say that it should be attainable to those with merit.  Not that we should punish the rich, or close private schools down, or expect employers to treat MIT grads the same as it treats Michigan State U grads.  But if you're really trying to take your university education seriously, not as a path to some higher material gain, and not using pell grants to buy weed, but really taking the education--a means to better understand the world around you, and contribute to its well-being in a way that may or may not be measurable--then in my opinion you should be treated the same whether you're an art major or an engineering major.  

[Sbane]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

It could be fixed but we need to ask ourselves if we would really be able to live with being the kind of society that does things like that.

Giving incentives to students to study in fields that would gain them a job is a bad thing?

[phk]

You must be logged in to read this quote.

Angus, a few points here.

1.) I do see value in the arts. I'm one of the few non-art people at my school that even bothered to visit plays, museums and art galleries. Even if it's not a sales/revenue value but at least a higher non-monetary social utility. People studying science and business should understand that too.

2.) Sadly, in terms of employment and the job market. Not all majors are treated equally. Even in a personal case, if a friend of yours needed a loan, I'm sure there's certain friends with whom you'd just write off "bad debt expense" and some would be "interest income".

3.) The idea of a kid taking out large sums of debt for a sociology degree for example.... doesn't sit well with me, even if he isn't poor. I was shocked that a salesperson where I worked took out $100k on a history degree. Of course it was probably good for us in the sense he was driven/motivated to get commissions to get that down.  Btw weren't we all cringing when people who obviously weren't able to pay back mortgage loans were given them anyway in 2003-2005?

[Okay, maybe Mike Johnson is a competent parliamentarian.]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

It could be fixed but we need to ask ourselves if we would really be able to live with being the kind of society that does things like that.

Giving incentives to students to study in fields that would gain them a job is a bad thing?

Defining education in terms of future monetary value and punishing people for wanting to pursue artistic or humanistic fields of study is an extremely bad thing.

I should note that I oppose the student loan system in general, for many of the reasons relating to bad loans that Torie just elucidated, and instead support much cheaper or free public universities.

[Marokai Backbeat]

Certainly doesn't seem like a big ideas sort of proposal, but it's better than nothing, especially if you consider this alongside the earlier reforms in his term of getting a lot of banks out of the student loan process. So, pretty good if you look at the big picture.

[Sbane]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

It could be fixed but we need to ask ourselves if we would really be able to live with being the kind of society that does things like that.

Giving incentives to students to study in fields that would gain them a job is a bad thing?

Defining education in terms of future monetary value and punishing people for wanting to pursue artistic or humanistic fields of study is an extremely bad thing.

I should note that I oppose the student loan system in general, for many of the reasons relating to bad loans that Torie just elucidated, and instead support much cheaper or free public universities.

And most of my concerns would be related to handing out huge loans to students who then can't pay it back.

[Okay, maybe Mike Johnson is a competent parliamentarian.]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

It could be fixed but we need to ask ourselves if we would really be able to live with being the kind of society that does things like that.

Giving incentives to students to study in fields that would gain them a job is a bad thing?

Defining education in terms of future monetary value and punishing people for wanting to pursue artistic or humanistic fields of study is an extremely bad thing.

I should note that I oppose the student loan system in general, for many of the reasons relating to bad loans that Torie just elucidated, and instead support much cheaper or free public universities.

And most of my concerns would be related to handing out huge loans to students who then can't pay it back.

Which is exactly why I oppose the loan system and support a more explicit, rigorous system of subsidization that doesn't predicate itself on faulty assumptions of people being good for it in the future. Sorry if my post was unclear about that.

[tmthforu94]

This is one area where I have to break from the party line and support what's best for me. Hopefully I won't have huge loans and it won't affect me whether or not this passed. Fingers crossed.

[○∙◄☻¥tπ[╪AV┼cVê└]

Oh yeah, this is how it'll be paid for, and still leave lots of profits for middlemen CEOs.
As of July 1, 2012, even the subsidized loan rates are going up to 6.8%.

Also, that debt ceiling capitulation from Obama a few months ago removed 2 different things effective that date
1. Interest on subsidized loans will no longer be paid for grad students
2. Grad students will no longer be able to get subsidized loans.

1 and 2 are the exact same thing.

Not at all.
1 means that they won't have the interest paid for existing loans, which could be from when they were an undergrad (or a pre July 1 2012 graduate loan)
2 means that they won't be able to get a new loan as a graduate student after July 1 2012.

Obviously 1 will save the government a ton of money. As for 2, since they're already 6.8%, so I don't know how much of a difference that will make.

They can still get unsubsidized loans after that date which is what those existing loans revert to after that date.

Existing loans would remain subsidized, but the government would no longer pay the interest for grad students.

What do you think subsidized means?

Well, obviously they will have the same high interest 6.8% rate, so they'll be cash cows either way. However, the subsidized loans have the government pay the interest while they're an undergraduate, or forbearance or perhaps certain other situations, and currently a grad student. In the case of forbearance, the 2nd thing I mentioned does make a difference.

Wow the way you wrote that is confusing! Look my understanding of subsidized and unsubsidized is that the subsidized loans have the government pay the interest while in school. Am I missing something? If the government is stopping paying interest during grad school then that by default means that there are no subsidized loans being issued to grad students. Maybe someone can fill me in on what piece I'm missing here?

No, actually it's two different things, that even subsidized loans accumulate interest when in grad school, and that grad students can't get new subsidized loans. Why is this so hard to understand?

[○∙◄☻¥tπ[╪AV┼cVê└]

Did you mean to say existing loans would only remain subsidized in the case of someone still being in undergraduate eduction? Otherwise how would it still be a subsidized loan?

^^^^^

Loans that were issued as subsidized loans while in undergrad are no longer subsidized after school. You may as well just call them unsubsidized after that point.

It makes a difference if you go back to school or get another kind of defermment.

[Wonkish1]

Did you mean to say existing loans would only remain subsidized in the case of someone still being in undergraduate eduction? Otherwise how would it still be a subsidized loan?

^^^^^

Loans that were issued as subsidized loans while in undergrad are no longer subsidized after school. You may as well just call them unsubsidized after that point.

It makes a difference if you go back to school or get another kind of defermment.

Fair enough!



Otherwise to your other posts. The issue about it being 1 or 2 separate things is ultimately semantics so their is really no point to spending any more time on it.

[angus]

2.) Sadly, in terms of employment and the job market. Not all majors are treated equally. Even in a personal case, if a friend of yours needed a loan, I'm sure there's certain friends with whom you'd just write off "bad debt expense" and some would be "interest income".

3.) The idea of a kid taking out large sums of debt for a sociology degree for example.... doesn't sit well with me, even if he isn't poor. I was shocked that a salesperson where I worked took out $100k on a history degree. Of course it was probably good for us in the sense he was driven/motivated to get commissions to get that down.  Btw weren't we all cringing when people who obviously weren't able to pay back mortgage loans were given them anyway in 2003-2005?

Yes, there are those friends (or, more likely, relatives) to whom I "loan" money and I think of it, even as I loan the money in some cases, as a grant. 

I think we are in accord with respect to the problem.  Yes, credit (student loan and other loans as well) is too easy to come by.  We've discussed that elsewhere. 

I just think that the federal government ought not to be in the business of making student loans in the first place.  If you want to go to an expensive private college and can't afford it, you'll have to find a private lender, and abide by the terms.  But the guaranteed loan program is probably here to stay.  In any case, we shouldn't be encouraging welchers.  (I don't think you were suggesting that.  I was just saying that in response to the thread in general.) 

My solution would be to have those sociology majors and history majors with limited means but who make good grades go to state colleges and universities.  It's a state-by-state matter, but I would support taxpayer-subsidized public four-year college or university education for the residents of my state, provided that they demonstrate the appropriate aptitude and high-school achievement, in terms of grades and teacher recommendations.  I understand that it would raise my taxes, but no more than the amount that they'd be raised if we start giving money away (without strings attached) as was suggested by the Obama administration.  Also, the actual tuition would be set by binding referenda, or by the legislature, and we wouldn't see upward creep due to the prevalence of free federal money flowing into the state via tuition loans. 

Moreover, Obama seems to be bypassing congress.  This subverts the will of the people.  The whole point of the revolution was to remove kings, not create them.

The crucial question we must ask ourselves is whether we want to encourage more debt, or encourage more education.  I think we should certainly encourage education, but this proposal merely encourages debt--with the promise of debt forgiveness--and sets up a vicious cycle in which universities raise tuition in response to supply (free government money) and demand (a larger pool of potential students.)

Of course I continue to support grants for scientific and engineering research.  And, for that matter, for research in the social sciences and in the humanities.  After all, it costs so much less to pay for a plane ticket or a library card than it costs to build a nuclear reactor or a gene sequencer, so those humanities research projects won't be nearly as expensive as the physics, chemistry, and microbiology research.

[opebo]

The "student debt" problem could be fixed if people studying non-money making fields were given the shaft.

Isn't that about 98% of students?

[Sbane]

You still need to make 20 years of payments, before the loan is forgiven. You can't just laze around for 20 years, you actually have to make payments. Do I need to say again that you need to make 20 years of payments?

This is why lowering the cap on maximum payments is more bothersome to me. Let the people sacrifice a bit each month and pay off their loans, but if they get stuck in sh**tty jobs due to their economy, don't let the debt hang over their head for that long. I seriously doubt many will even qualify, even your history major with a 6 figure debt. And anyways, it's still in your best interest to pay it off as soon as possible as most of the debt will be at 6.8% interest or higher. Though there are a lot of stupid people in this world.