Archive for the ‘Student Loans’ Category

So, what explains student loan defaults?

April 5, 2019

Prompted by ideas being floated  to make colleges underwrite their their students’ loans, I’ve been doing some digging.

The most headlined explanations of student loan defaults report that over half of for-profit college students and over half of black students default on their loans.

The numbers may be true, but they’re more emotionally-charged than they are instructive.

So,  the left-leaning Brookings Institution drilled deeper on the headlined conclusions to understand what accounts for gaps in student loan defaults.

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Here are some of the more interesting conclusions from the “Evidence Speaks Report”…

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Should colleges be forced to underwrite student loans?

April 4, 2019

Sounds like a logical, easy fix, right?
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Yesterday, we posted about the $1.5 trillion in outstanding student loan debt held by about 45 million former students.

We argued that that’s a problem because (1) The student loans fuel tuition increases by enabling colleges to fund inefficiencies (2) Servicing the debt load constrains borrowers lifestyle choices (e.g. marriage, home buying) by crowding out other debt capacity, and (3) When interest rates rise (and, they eventually will) repayment will pose an increasingly difficult challenge for many (most?) borrowers.

Following on that last point,  the default rate on student loans is about already 20% on average … with big differences by the type of school the borrower attended.

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What explains the differences?

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Student debt continues to skyrocket …

April 3, 2019

One of the byproducts of the recent college admissions scandal has been an elevated look at college attainment (i.e. what are students really learning) … and ballooning student debt.

Last week we looked at what students are really learning.

Now lets shift the spotlight to student debt.

First, some sobering statistics

Student debt has more than tripled since 2004, and is now over $1.5 trillion — second only to mortgage debt — and higher than both credit cards and auto loans.

That’s a problem because (1) The student loans fuel tuition increases by enabling colleges to fund inefficiencies (2) Servicing the debt load constrains borrowers lifestyle choices (e.g. marriage, home buying) by crowding out other debt capacity, and (3) When interest rates rise (and, they eventually will) repayment will pose an increasingly difficult challenge for many (most?) borrowers.

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Let’s drill down on that $1.5 trillion…

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The bleak job market for 2010 grads …

August 31, 2010

Some factoids from USA Today …

  • About 2.4 million students graduated with bachelor’s and associates degrees as part of the Class of 2010
  • Fewer than half of employers plan to hire recent college grads in 2010 … 79% in 2007
  • Two-thirds of those graduating with a bachelor’s degree are saddled with an average of $23,186 in federal and private loans
  • Among 2009 U.S. college graduates, 80% moved back home with their parents after graduation up from 67% in 2006.
  • Those with computer-related degrees led their class with an average job offer of $58,746.

Source: USA Today;Toughest test comes after graduation: Getting a job, 5/21/2010
http://www.usatoday.com/money/economy/employment/2010-05-19-jobs19_CV_N.htm?csp=obnetwork

What do student loans have to do with healthcare ? … and why you should care if you have a student loan.

March 23, 2010

Answer: Nothing … It’s a stretch to lump student loans and healthcare except that the apparent (i.e. unproven, unsubstantiated) savings accruing from nationalizing of student loan programs are needed to make ObamaCare look like it reduces the deficit.

I think there are huge implications — not only to banks, but also to student borrowers.

Here’s a twist: under ObamaCare, the tax-fines are going to be policed by 15,000 additional IRS agents. 

Do you think they’ll add another 15,000 to work collections on student loans ?

I’m betting the over on that one …

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Excerpted from USA Today:  Revamped student loan bill tucked into massive health bill, Mar 19, 2010

To satisfy budget requirements and win over skeptical deficit hawks in their own party, Democratic leaders wound up directing a total of $19 billion (of the $61 billion in revenues that the student loan shift would produce over 10 years) to reduce the deficit and help pay for the health care portion of the legislation.

The basic thrust of the legislation, which would derive its $61 billion in savings by shifting all lending from the lender-based (but government-subsidized) Federal Family Education Loan Program to the government’s Direct Loan Program. The lenders have been trying to months to turn lawmakers against the idea of ending their ability to make loans (and the accompanying subsidies), arguing that doing so would kill thousands of jobs.

But on Thursday, they took another approach, directing their ire at the billions of dollars that would go to purposes other than helping students afford college, namely health care.

“Should students be paying for their neighbor’s medical costs? Separate consideration of student loan reform is imperative to ensure that legislation that minimizes job losses and reinvests savings in higher education can be considered.”

The most blatantly political move in the legislation: an exemption that would allow a state-run bank in North Dakota (alone among the states) to continue to offer loans directly to students.

Democratic Congressional aides defended the decision because they said the North Dakota bank is, as a taxpayer-owned agency, essentially a government lender like the federal government, so sustaining its ability to lend is consistent, they argued, with the legislation’s overall goal.

But critics compared the deal to the much-criticized exemption that health care supporters granted to Sen. Ben Nelson of Nebraska to win his key vote for that legislation,

“This ‘Bismarck Bank Job’ provision looks like exactly the sort of backroom deal that makes the American people hate Washington and the whole process that has led to this massive, awful government takeover of our health care.”

Full article:
http://www.usatoday.com/news/education/2010-03-19-IHE-student-loan-measures-in-health-bill19_ST_N.htm