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Ripping Off Young America: The College-Loan Scandal

Old 08-21-13, 11:46 AM
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Ripping Off Young America: The College-Loan Scandal

http://www.rollingstone.com/politics...andal-20130815

A 2005 Wall Street Journal story by John Hechinger showed that the Department of Education was projecting it would actually make money on students who defaulted on loans, and would collect on average 100 percent of the principal, plus an additional 20 percent in fees and payments.

Hechinger's reporting would continue over the years to be borne out in official documents. In 2010, for instance, the Obama White House projected the default recovery rate for all forms of federal Stafford loans (one of the most common federally backed loans for undergraduates and graduates) to be above 122 percent. The most recent White House projection was slightly less aggressive, predicting a recovery rate of between 104 percent and 109 percent for Stafford loans.
The government profits when people default on their student loan payments. Credit card debt recovery rates of 15 percent are not uncommon.

Student-loan debt collectors have power that would make a mobster envious” is how Sen. Elizabeth Warren put it. Collectors can garnish everything from wages to tax returns to Social Security payments to, yes, disability checks. Debtors can also be barred from the military, lose professional licenses and suffer other consequences no private lender could possibly throw at a borrower.

The upshot of all this is that the government can essentially lend without fear, because its strong-arm collection powers dictate that one way or another, the money will come back. Even a very high default rate may not dissuade the government from continuing to make mountains of credit available to naive young people.
One thing that I've seen a lot of people talk about is how bankruptcy won't wipe clean outstanding student loans. Is this because you can't repossess an education? If someone takes out a loan to buy a house and they don't make payments, they can lose their house. If someone takes out a loan to buy a car and don't make payments, they can lose their car. If someone doesn't pay their credit card bills, repo men can't take back food or vacations, but they can take TVs and other durable goods. But there's no way to suck out an education from someone's brain.

But people go to school for 2 reasons: an education and a piece of paper. Could that piece of paper be repossessed? If an employer wants to verify that a job applicant actually attended the university they list on their resume, but that person declared bankruptcy and got their student loans wiped clean, could their record of having attended said university also be wiped clean?
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Old 08-21-13, 12:10 PM
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Re: Ripping Off Young America: The College-Loan Scandal

But once you get that degree from that university that advertises on the sides of city buses, good jobs a-plenty await you, right? Right?
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Old 08-21-13, 12:11 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by jfoobar View Post
But once you get that degree from that university that advertises on the sides of city buses, good jobs a-plenty await you, right? Right?
Seven figures await. At least seven figures. Duh!
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Old 08-21-13, 12:23 PM
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Re: Ripping Off Young America: The College-Loan Scandal

It's a few years old, but "College, Inc." from PBS Frontline is still worth watching:

http://www.pbs.org/wgbh/pages/frontl...llegeinc/view/
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Old 08-21-13, 12:29 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Pft. I skipped college before it was cool.
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Old 08-21-13, 12:48 PM
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Re: Ripping Off Young America: The College-Loan Scandal

That > 100% number is only the principal, right? If someone pays off their student loans without going through default, the interest collected will probably be more, I would think. And I'm sure the average rate of return on defaults for credit cards are pretty high, if you consider how much interest they likely make off of the borrower before they default.

It's true that you can't collect back an education, and if you allowed bankruptcy how many prospective doctors and lawyers and the like, who are drowning in debt right after college but can go on to make a pretty good living, would have their student loans wiped away by declaring bankruptcy shortly after graduation? And then who in their right mind would lend money to students?

The scam is really that the cost of education went way, way up with how much freely available money there is, to the point that it's really difficult to go to college without getting financial aid. If you did away with financial aid, would tuition go down?

In semi-related news, Loyola Law school dropped enrollments partly because graduates were having a hard time finding jobs:
http://www.latimes.com/news/local/la...,2313212.story
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Old 08-21-13, 12:50 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Depending on the amount of loans you have, there's nothing stopping someone (with enough credit) to pay back the loans via credit card advances and then default on the cards. You'll fuck your FICO for seven years, maybe even end up with a few judgments, but you could technically free yourself from that obligation for life (or end up settling for pennies on the dollar).
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Old 08-21-13, 12:53 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Troy Stiffler View Post
Pft. I skipped college before it was cool.
Same - quit after 2.5 years back in 1995. Doing better than most people I know my age with degrees. And no student loan debt.
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Old 08-21-13, 01:03 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Student-loan debt collectors have power that would make a mobster envious” is how Sen. Elizabeth Warren put it.
Her $430,000 salary to teach one class at Harvard would also make a mobster envious. Perhaps the Senator will also rail against such tuition-bloating salaries, and maybe kids wouldn't have to take out such outrageously high loans to begin with.
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Old 08-21-13, 01:11 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Wasn't the law changed a few years back that you could no longer wipeout credit card debt via bankruptcy?
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Old 08-21-13, 01:21 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by bunkaroo View Post
Same - quit after 2.5 years back in 1995. Doing better than most people I know my age with degrees. And no student loan debt.
And a full head of hair!
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Old 08-21-13, 02:24 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by wishbone View Post
And a full head of hair!
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Old 08-21-13, 02:48 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by WCChiCubsFan View Post
Wasn't the law changed a few years back that you could no longer wipeout credit card debt via bankruptcy?
Yes.
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Old 08-21-13, 02:49 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Rockmjd23 View Post
Her $430,000 salary to teach one class at Harvard would also make a mobster envious. Perhaps the Senator will also rail against such tuition-bloating salaries, and maybe kids wouldn't have to take out such outrageously high loans to begin with.
Yes, because if there's one thing Harvard has always been, it's cheap.
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Old 08-21-13, 02:52 PM
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Re: Ripping Off Young America: The College-Loan Scandal

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Old 08-21-13, 02:52 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by WCChiCubsFan View Post
Wasn't the law changed a few years back that you could no longer wipeout credit card debt via bankruptcy?
Yes but you can settle credit card debt at ridiculous markdowns. CC debt can be (and most often is) charged-off after long periods of non-payment. Those debt obligations can be sold to third-party collections for the cheap, and negotiated down for the cheaper.

The same can't be done for student loans.
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Old 08-21-13, 02:54 PM
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Re: Ripping Off Young America: The College-Loan Scandal

I will say this, going back to college, the amount of money thrown at students is staggering. I was offered $7,500 in federal loans this year, and another $12,000 from private lenders. That's just for one year of college. Multiply that by four (or more if you go to grad school), and it's real easy to wrack up debt fast.
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Old 08-21-13, 02:58 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Tracer Bullet View Post
Yes, because if there's one thing Harvard has always been, it's cheap.
I think it was back in the 1690s.
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Old 08-21-13, 03:11 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Rockmjd23 View Post
I think it was back in the 1690s.
And Elizabeth Warren didn't teach there then!!! Coincidence?!!
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Old 08-21-13, 03:12 PM
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Re: Ripping Off Young America: The College-Loan Scandal

If bankruptcy doesn't relieve student loan debt or credit card debt, what good does it do?
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Old 08-21-13, 03:14 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Groucho View Post
If bankruptcy doesn't relieve student loan debt or credit card debt, what good does it do?
Ruins the credit of the poors so they can't rent an apartment or get a job.
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Old 08-21-13, 03:18 PM
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Re: Ripping Off Young America: The College-Loan Scandal

People defaulted a lot so congress passed a law that kept student loans from being able to be discharged in bankruptcy. Next step is the hospitals to cry about going bankrupt because too many people with insurance can't pay their bills and the state no longer pays those because the people have insurance that they can't afford the co-pay/deductible with. So then the government will come out with government back medical loans. And those won't be able to be discharged in bankruptcy either. And we can all marvel at how caring we are for poor people because we give them subsidies to pay for their health insurance.
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Old 08-21-13, 03:25 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Tracer Bullet View Post
Ruins the credit of the poors so they can't rent an apartment or get a job.
Well good. I don't want poor people living next door to me or working in my office.
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Old 08-21-13, 03:28 PM
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Re: Ripping Off Young America: The College-Loan Scandal

Originally Posted by Groucho View Post
If bankruptcy doesn't relieve student loan debt or credit card debt, what good does it do?
Well if your opponent lands on it, it helps you greatly.
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Old 08-21-13, 03:51 PM
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Re: Ripping Off Young America: The College-Loan Scandal

I remember when they changed the way credit card debt was treated back in W's term but wasn't sure if it had changed again.

I remember a never ending parade of reps, mustly Republican, talking about personal responsibility. What a joke, how about corporate responsibility?

The reform was nothing more then corporate welfare so the credit card companies wouldn't have to take responsibility for their poor business decisions of giving cards to people who shouldn't have them. How about they step up and take for their poor decisions.
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