The rigged economy

[cm husker]

No, I'm absolutely not saying those people shouldn't get loans. But they shouldn't get loans on the same terms as a kid who did well and earned a good rating. It's no different than why interest rates vary based on credit risks.

 

I get that there is anecdotal evidence of kids who were late bloomers and that no system is perfect. But, we need to have one that is designed to deal with the most common cases, not the corner cases.

 

I don't really understand what you mean by a government or quasi government agency deciding on who goes to school. In my scenario, it is private banking institutions who decides what loan a kid qualifies for. But, on the topic, government run universities decide everyday who may or may not attend a certain school. So not sure why you're concerned about that.

 

I disagree with the grade stipulations. For one thing, a school on a hard curve would hurt themselves and their students. for another, schools would have an even greater incentive to inflate grades (something that is already a problem today).

 

Your last sentence makes no sense to me. It's not coddling someone to say "banks and schools, do your jobs before lending tens to hundreds of thousands to art grad majors."

 

If anyone is being coddled right now, it's the banks and schools. For example, students loans are one of the few types of debt that is nondischargeable in bankruptcy, rates set statutorily at a very high rate (7%) and taxpayers backstop the loans. It's crazy town. Literally a money grab by institutional investors and a perfect example of how we transfer wealth from the less wealthy to the more wealthy.

[BigRedBuster]

Most student loans are not given out by banks or lending institutions. They are federal student loans that are designed (in a good way) around not having payments or interest kick in until the kid is done with school.

[cm husker]

You're factuallt incorrect in that part of this BRB.

 

Payments are only deferred. Interest most certainly accrues.

 

I really don't want to get into what and how Fannie Mae works, but I'll sum up by saying that federal student loans are absolutely not direct loans from the government.

 

Here's the fundamental problem: the rules basically say that if you are admitted to a qualifying institution, including shitbox colleges (both for and "nonprofit") that charge $15,000 a year, you as a student will have access to those funds through a federally guaranteed loan, whether you are likely to obtain a productive degree or not. After 4 years, said borrower has $70k+ in loans (again, interest was quietly accruing) and likely a job that doesn't pay enough to justify that investment. But the schools have made out because they got their tuition. And the banks and their investors, including those who buy SLABs based on Fannie loans, are protected six ways from Tuesday. The student is leaned on to pay and if he can't, the taxpayer is required to keep the bond holders whole. Why? Because the system is rigged.

 

In my system, would there be less loans? Possibly. But is that a bad thing? I say no.

 

Because it would put downward pressure on tuition and it would be more fair to students and taxpayers. For example, good students with engineering degrees would not have to subsidize art history major screw ups because the engineers rate would decline and the fluff majors rate would increase.

 

That has the added benefit of signaling to students what degrees they should pursue - a huge plus for the economy as a whole.

[BigRedBuster]

You're factuallt incorrect in that part of this BRB.

 

Payments are only deferred. Interest most certainly accrues.

 

 

You are talking about the difference between a subsidized and unsubsidized student loan.

 

I have two kids in college now. I'm pretty well versed in how it works.

[cm husker]

Then you better check on that interest deferment. Because unless it's changed recently, interest applies.

 

And sub/unsub isn't the distinction I'm drawing.

 

If I were you, I'd also have them consider private loans. The interest rates are dirt cheap. You lose out on some cancellation rights, but cutting a loan by 5% is really a big win.

[BigRedBuster]

Thanks for the advice....but, we have things figured out fairly well.

 

Here is a quote from here.

 

The U.S. Department of Education pays the interest on a Direct Subsidized Loan

• while you’re in school at least half-time,
• for the first six months after you leave school (referred to as a grace period*), and
• during a period of deferment (a postponement of loan payments).

 

[cm husker]

Ah, I see that the rule changes for direct sub as of 2014 per the note.

 

is the cap on direct sub loans line $6k a year still?

 

Because that's a small fraction of most people's overall loan portfolio.

[cm husker]

It's not clear to me why general taxpayers should be bearing the costs of those loans. I think there are more efficient ways to invest public funds.

[BigRedBuster]

Ah, I see that the rule changes for direct sub as of 2014 per the note.

 

is the cap on direct sub loans line $6k a year still?

 

Because that's a small fraction of most people's overall loan portfolio.

Not sure when you went to college. This is how it worked when I went to school a very very long time ago.

 

Not sure what the limit is this year.

 

If you are going to a state school, I honestly don't see why your loans for most of your undergraduate should be much more than this. My kids have been working since they were 14-15 saving for college. My daughters work 50-60 hours a week in the summer saving up money. My oldest daughter now has a job as a tutor during the school year to add to the pot. My son (16) has been working 3 jobs this summer but hasn't quite got to the level of hours of his sisters. We add a little and then they will finance the rest. My oldest has a scholarship which will allow her to get through without any loans (undergrad). My second who is just starting has figured out how she won't need to start borrowing till maybe her junior year.

 

Again....this is with a little (not a lot) help from us.

If someone is coming from a family whose income is much less than ours, they would be eligible for more financial aid.

 

Now, I also know kids who don't do squat all summer. Their parents have the attitude that little Johnny or suzie should be playing sports all summer or shouldn't be stressed out by the weight of having to have a job. Well.....sorry, then you will need to borrow more when you go to school.

 

 

 

========

 

My point in all of this and the gist of my original post is, there are ways to improve your lot in life. There are systems set in place to help you. There are people who will hire you and train you. There are loans and grants to go to college (If you are serious about going and doing well). There are relatively cheap community colleges....etc.

 

Can all of this be improved on? Definitely!!! We can all agree on that.

[cm husker]

From your link, those direct sub loans are need based.

 

If you don't qualify for that program, you pay all accruing interest.

 

I had my college paid for. My experience is from grad school, but the principles are the same.

 

As a side note, along with all "need based" forms of welfare, it's unfair that kids who work can end up being penalized in the form of losing qualification for special programs. It's a classic welfare cliff.

 

I think your kids sound impressive. I wish we had a system that awarded their responsible behavior with lower interest loans (to the extent they need them). Instead they are lumped together with everyone else, including irresponsible frat kids.

[Moiraine]

I'm starting my student loan payments in December. (Well, now really but they start being due in December). About half of them have interest accruing and half don't. Some of the ones that don't are from before 2014.

[BigRedBuster]

I'm starting my student loan payments in December. (Well, now really but they start being due in December). About half of them have interest accruing and half don't. Some of the ones that don't are from before 2014.

What percentage of the cost of going to college did you have to finance? 100%? 75%? 25%?????

[Moiraine]

 

 

I'm starting my student loan payments in December. (Well, now really but they start being due in December). About half of them have interest accruing and half don't. Some of the ones that don't are from before 2014.

What percentage of the cost of going to college did you have to finance? 100%? 75%? 25%?????

Maybe 80% for undergrad. Grad school was free.

[BigRedBuster]

 

 

I'm starting my student loan payments in December. (Well, now really but they start being due in December). About half of them have interest accruing and half don't. Some of the ones that don't are from before 2014.

What percentage of the cost of going to college did you have to finance? 100%? 75%? 25%?????

Maybe 80% for undergrad. Grad school was free.

 

Wow....so you were able to get through grad school with only financing 80% of undergrad. That's pretty good.

 

Pardon me if I pry and please let me know if you don't want to answer....I'm fine with that.

 

But, why weren't you able to pay more of your undergrad? And, did you go to UNL?

[Moiraine]

 

 

 

 

I'm starting my student loan payments in December. (Well, now really but they start being due in December). About half of them have interest accruing and half don't. Some of the ones that don't are from before 2014.

What percentage of the cost of going to college did you have to finance? 100%? 75%? 25%?????

Maybe 80% for undergrad. Grad school was free.

Wow....so you were able to get through grad school with only financing 80% of undergrad. That's pretty good.

 

Pardon me if I pry and please let me know if you don't want to answer....I'm fine with that.

 

But, why weren't you able to pay more of your undergrad? And, did you go to UNL?

Yes it was UNL. My first attempt at college straight out of high school didn't go so hot because I was immature. Then when I went back there weren't nearly the number of scholarships I got offered out of high school (I think this is normal), and I didn't want to ask my family for help because I was an adult at that point. I had saved a little bit but that went to the community college classes that I transfered.

 

With grad school I got an assistantship so that paid for tuition. I just had to pay for room/board.