"Loan payments will be capped at 10 percent of a student’s disposable income (it’s currently 15 percent) and any debt remaining after 20 years will be forgiven (the current threshold is 25). For public servants – including teachers, nurses, or members of the armed forces – that cap is 10 years."
Now, I have every intention of paying back every penny I am borrowing for school, but I found this interesting.
More generally, the reform cuts out the middle man banks in the student loan process, lending the money directly from the government. I don't think there is expected to be much difference noticeable to students but, in general, I approve for a couple reasons:
1. although there are no credit restrictions on student loans, those of us with significant bruising might have a better experience with the fed than with for-profit lending institutions, and
2. after TARP, I am having a harder and harder time feeling bad for banks generally.
"just stopping the practice of paying them subsidies (guaranteed profits) of taxpayer dollars, in addition to the federal government assuming all the risk for the loans"
We do that? Yikes. I didn't look it up, just went by what I thought the op said.
"in addition to the federal government assuming all the risk for the loans" I knew the gov assumed a lot of the risks, didn't realize it was that much.
"just stopping the practice of paying them subsidies (guaranteed profits) of taxpayer dollars, in addition to the federal government assuming all the risk for the loans"
We do that? Yikes. I didn't look it up, just went by what I thought the op said.
"in addition to the federal government assuming all the risk for the loans" I knew the gov assumed a lot of the risks, didn't realize it was that much.
Yes, "we do that" -- have for many years -- and the whole point of the federally guaranteed student loans is that the federal government guarantees the banks it will pay them back if the borrowers default. So the private banks make the profits from making the loans without assuming any of the risk -- sweet deal for the banks, rip-off for the taxpayers.
"I really don't see any difference between spending tuition earnings that come from private lenders through the hands of students and spending tuition earnings that come the Fed through the hands of students"
If you knew that the only way to get rid of a loan was to pay it off would you be more likely to borrow more or more likely to borrow less than if you knew the loan would go away in five years even if only half of it was paid off? (the bill is different, but the same concept).
It isn't the same concept if the borrower actually understands the terms and conditions of the loan forgiveness program. The term is 10 years, 120 payments, and 10 years of working for a non-profit. Take the number of people you believe might jump at the chance to borrow exorbitant amounts of money with the impression that most of it will be forgiven - then subtract the number of people who are willing or able to put in 10 consecutive years in public service for a non-profit and you will likely yield a much smaller number.
My point stands. Loan amounts that exceed the cost of tuition and fees don't go to the school. They go to the student. The money the school receives remains unchanged if a student accepts a larger loan amount. Unless the student decides to charitably invest the overage of their loan funds into the school's budget, it won't make any difference whether the loan was awarded through a private lender or a federal one.
http://news.yahoo.com/s/ap/20100330/ap_on_bi_ge/us_obama_student_loans"The law strips banks of their role as middlemen in federal student loans and puts the government in charge. ""Private lenders still will make student loans that are not backed by the government, and they still will have contracts to service some federal loans." (As in playing collection agent.)Then there is:http://www.reuters.com/article/idUSTRE62T1FX20100330"Opponents say the action will reduce students' lending options and eliminate the jobs of thousands of private lenders, hurting efforts to remedy an ailing U.S. economy that has a 9.7 unemployment rate."One of the reasons why the ACLU failed before is that the Government didn't loan the money. They subsidized BANKS to loan the money. Now it is the GOVERNMENT loaning the money with banks as payment handlers. In that difference, there will be a new fight. ACLU can always say that those attending private institutions can STILL get student loans, only private ones....which we all know require good credit, a foundation for repayment, and interest accrued during school attendance. This will be cost prohibitive. There will then be a decrease in student attendance ultimately resulting in the closure of many. Now, you can laugh as what I said...but folks laughed at those that said that Obama was a far left marketing himself as a centrist. He has done exactly what he said he wouldn't do. Conservative media outlets said he was going to operate this way while he was still a candidate. They were mocked by the left media outlets. They were right.I don't mind if you mock me. Lets just check back with each other in 2012.
BTW, I hate it when this site skips the formatting! (Intermittent issue I have seen before!)
http://news.yahoo.com/s/ap/20100330/ap_on_bi_ge/us_obama_student_loans"The law strips banks of their role as middlemen in federal student loans and puts the government in charge. ""Private lenders still will make student loans that are not backed by the government, and they still will have contracts to service some federal loans." (As in playing collection agent.)Then there is:http://www.reuters.com/article/idUSTRE62T1FX20100330"Opponents say the action will reduce students' lending options and eliminate the jobs of thousands of private lenders, hurting efforts to remedy an ailing U.S. economy that has a 9.7 unemployment rate."One of the reasons why the ACLU failed before is that the Government didn't loan the money. They subsidized BANKS to loan the money. Now it is the GOVERNMENT loaning the money with banks as payment handlers. In that difference, there will be a new fight. ACLU can always say that those attending private institutions can STILL get student loans, only private ones....which we all know require good credit, a foundation for repayment, and interest accrued during school attendance. This will be cost prohibitive. There will then be a decrease in student attendance ultimately resulting in the closure of many. Now, you can laugh as what I said...but folks laughed at those that said that Obama was a far left marketing himself as a centrist. He has done exactly what he said he wouldn't do. Conservative media outlets said he was going to operate this way while he was still a candidate. They were mocked by the left media outlets. They were right.I don't mind if you mock me. Lets just check back with each other in 2012.
BTW, I hate it when this site skips the formatting! (Intermittent issue I have seen before!)
That's a grand scenario, but what you haven't considered in your doomsday scenario is the nature of free markets.
Now that the Fed will be providing student loan dollars that banks once provided, banks will have to compete with the Fed for student business by offering terms, interest rates, origination fees, and eligibility requirements that make their loans attractive to students.
You've also totally ignored the folks here who've (rightly) mentioned that federal dollars are already circulating through private religious institutions and have for a long time.
Elkpark, I meant the subsidies also part. I didn't know we did that on top of the federally guarentee.
triquee, "Take the number of people you believe might jump at the chance to borrow...impression it will all be forgiven" I think the vast majority think they will pay back every penny when they take out the loans. That wasn't my point. I don't think people are out to scam the system. I think many don't leave enough margin in their plans to allow for the unexpected and often they don't leave enough margin for the expected either.
"Unless the student decides to charitably invest the overage of their loan funds into the school's budget, it won't make any difference whether the loan was awarded through a private lender or a federal one."
It does matter because if the student can feel the cost difference s/he will be a lot more willing to go the school that s/he doesn't like as much but costs half a much. The bigger the safety net, the less the student feels the cost difference.
Exactly how many years or how many payments or what the circumstances are (non profit, etc) affect how big the safety net is but not that the size of the safety net influences the cost of school.
"you haven't considered in your doomsday scenario is the nature of free markets."
About the biggest factor in what makes a market free is how involved the government is in that market.
Re: The ACLU trying to prevent student loans from being given to those attending private religious schools. While they might try, I doubt they'll be very successful. As long as the school is accredited, they should have no issues. Students currently attending these schools are eligible for federal and state grants...you know, free money from the gov't.
You're right of course. This is just kinda low end right wing paranoia, I think...which is not to say that there aren't things to be concerned about wrt an intrusive federal government, but I think it's good to be a little more realistic and critical about it. If there haven't been ACLU cases against the distribution of federal funds to students attending faith-based colleges, I don't see how there could be any now.
It just doesn't make sense. But then, that's a functioning definition of paranoia: irrational personalized fear.
I'm going to stray slightly off the intended topic as I don't consider myself educated with it as well as I should be to form a logical opinion. What I would like to know is how a "healthcare bill" is incorporating things such as student loans, electronic funds transfers from citizen bank accounts, tanning taxes etc?
In my (as already stated) slightly uneducated opinion on the situation agree that government take over of the student loan organizations will definitely limit any free market competition. The very definition of free market is "A free market is a market without economic intervention and regulation by government except to regulate against force or fraud." so how does this in anyway promote a free market?
And you all can berate me but I am in complete agreement with FLmom's viewpoint, more government involvement is never a good thing and can lead (happened time and again throughout history) to more regulations and less freedoms. Call me paranoid.
Well, student loan reform is a separate issue from healthcare reform.
Also, as has been pointed out, it is likely that, forced to compete with the federal government, banks will in fact begin offering private student loans at lower interest rates and with lower restrictions than they have been able to in the past.
So, in a very real sense, the former situation actually encouraged collusion by the banks which is the opposite of market competition, while the new reform will actually create and encourage real competition for borrower dollars.
Saysfaa
905 Posts
"just stopping the practice of paying them subsidies (guaranteed profits) of taxpayer dollars, in addition to the federal government assuming all the risk for the loans"
We do that? Yikes. I didn't look it up, just went by what I thought the op said.
"in addition to the federal government assuming all the risk for the loans" I knew the gov assumed a lot of the risks, didn't realize it was that much.