The Department of Education, one of the nation’s leading student loan lenders, is getting serious about collecting on $67 billion in defaulted loans. Yesterday, Bloomberg News reported the mob-like lengths the government agency is going to in order to cash in:
The debt collector on the other end of the phone gave Oswaldo Campos an ultimatum:
Pay $219 a month toward his more than $20,000 in defaulted student loans, or Pioneer Credit Recovery, a contractor with the U.S. Education Department, would confiscate his pay. Campos, disabled from liver disease, makes about $20,000 a year.
“We’re not playing here,” Campos recalled the collector telling him in December. “You’re dealing with the federal government. You have no other options.”
Campos agreed to have the money deducted each month from his bank account, even though federal student-loan rules would let him pay less and become eligible for a plan — approved by Congress and touted by President Barack Obama – requiring him to lay out about $50 a month. To satisfy Pioneer, Campos borrowed from friends, cut meat from his diet and stopped buying gas to drive his 82-year-old mother to doctor’s visits for her Parkinson’s Disease.
The average student graduating with a bachelor’s degree comes away with over $25,000 in loans, which would require a monthly repayment of more than $200 for at least ten years. If the average is more than $25,000 — however — there is a large group of students who are walking away with significantly more, especially if they have then gone on to complete a post-graduate degree.
I’ve heard it argued that the student loan bubble burst will be bigger than the housing burst — the debt is held by a large proportion of one age bracket of the population, unlike a home cannot be sold (even at a loss), and unlike other debt is virtually impossible to be rid of, even after filing for bankruptcy. This year, the amount of debt held by America’s students will surpass the debt held by all of America’s credit card holders, while the rate of borrowing continues to increase for student loans at a faster rate than for any other kind of debt.
Instead of putting a stop to the extension of credit, the Obama administration has continued to allow the Department of Education to blindly loan tens of thousands of dollars to America’s students without so much as a notice informing borrowers how much their monthly payments will be upon graduation. After they are unable to pay it back, the Department of Education farms out the collection to private agencies who will stop at nothing to collect. Another solution, limiting the amount of debt offered to 18-year-olds, has seemingly never been considered as an option.
A new Pew Research Center survey found that almost 30 percent of people between 25 and 34 are living at home — and they are actually okay with the arrangement. The Pew study also showed the numbers of multigenerational households in the United States is at its highest level since the 1950s.
An entire generation of Americans is now reliant on their parents much later in life than any previous generation. Under ObamaCare, Americans can expect to be on their parents’ insurance plans until the age of 26, and they can also expect to be still living at home, putting off marriage until the average age of 27.
President Obama has fought to keep adults on their parents’ healthcare plans long after they should have moved out, gotten married, and started independent lives. He is trapping a generation (which he has narcissistically dubbed Gen44 after his presidency) in a cycle of personal debt, preventing them from being able to survive when the weight of the national debt comes crashing down. When the bell does start to toll on our historic debt burden, turning Washington, D.C., into Athens, don’t expect Gen44 to do anything but lead riots from their parents’ basements.
The real problem isn't extension of credit, it's that federal student loan guarantees shield colleges from competing on price (at least to a large extent). When I was applying to grad schools 11 years ago, I noticed that dozens of programs cost $18,500/ year in tuition. Why? Because that figure matched exactly the maximum guaranteed loans. I'd rather have no federally guaranteed loans at all, but one way to stop tuition inflation would be to lower the maximum guarantee. We should also allow student loans to fall under normal bankruptcy laws.
Many issue here. First of which is why should my child live in substandard housing since he can't afford a descent place to live? Why should I subsidize him so he can live in a safe neighborhood? Why can't he live at home, save his money and then when he is able to actually buy something instead of renting? Why can't he stay on my health insurance until he is 26? My child has many preexisting conditions which would make it virtually impossible for him to afford health care on his own if anyone even gave him insurance in the first place. My child hopefully will not graduate with debt from school, but believe it or not I am still paying my loans. So what if it has taken me 25 years to pay my own loans off. Big deal. n nIf you are interested in stopping the student loan bubble maybe you should have a word with the colleges and tell them to make it affordable. Or is college only for those who are the elites, able to afford it out of pocket or those so poor they receive generous financial aide packages? Everyone else should be plumbers, mechanics, work in theGap, be garbage men or servants? When I went to school-oh so many decades ago- there were all these same concerns about people not paying their student loans and the cost to society. I have news for you a greater cost to freedom and democracy is an ignorant populace. n nAlso when I graduated from college everyone was also worried about the debt. it wasn't as high then, well we didn't have as big a populace that also went on a huge decade long spending spree and thought they would never have to pay it back then either. We have to pay the piper. We screwed up. It will take years and years, probably a decade to work through this mess but you also don't do it by throwing your children to the wolves when especially they have no sword to protect themselves. Fix the economy and the children will be able to move out and take care of themselves. We did that to them. We allowed it to happen. it was our selfishness not theirs. They did not do this to themselves. n nGuess what, in then end as I grew older, we ended up paying our students loans, the US fixed its debt problem and the next generation came into being-our children. You talk about Obama and his narcissism of Gen44..yeah so? Instead of complaining come up with an answer and come up with an answer that really works. Not some full of baloney stick that makes everyone feel good but takes it out on our children and belittles who they are and what they are capable of becoming if given even half a chance. n
I would post a comment, but I'm too busy laughing at Gen44. n nOK, enough merriment. Here's the comment: n nThe Democrat Party is the electoral vehicle of American bankruptcy – moral, personal, local governmental and national. They have no plan to avoid those bankruptcies, except confiscation. That's because for Democrats the only unlimited resource is OPM – Other People's Money. n nGeithner to Ryan: "We don't have a plan, we just don't like yours." n nYouth of America! There is a solution. n nElect no Democrat anywhere, ever. n nIt's time to consign the Democrat Party to the ash heap, so that we can one day look back on it and these days as " another sad, bizarre chapter in human history…"
I know; it is kind of funny isn't it? I like the last line of this post by Bethany Mandel. Can't you just imagine all of the 28 year old student-loan debt-ridden, unemployed males swarming out of their parent's basements after playing on their Xboxes for 2 weeks straight; participating in riots in downtown cities across America; and then going home and asking their Moms to make them a sandwich?
There is no constitutional warrant for the existence of Federal student loans anyway, nor for the Dept of Education itself.. Phase them out and retire both the debt and the counter-productive and immoral, illegal, and impractical involvement of the Federal Govt in education.
One more rather snarky point… Bethany tell ppl what to do and how to raise a child after you have done it for a few decades yourself. Until that time dont give parental advice on any level. And after several decades of childrearing ask other parents if they care about your child rearing tips and issues. You will be surprised how noone will take you up on our offer….parents do what they deem best for their offspring and its noone elses business.
One thing I notice missing from this debate is the responsibility of the borrowers. If you don't wan't debt don't borrow! Just like the housing bubble, if you can't afford the loan don't sign the loan documents!!