13 ms·

Student Debt in America: Lend with a Smile, Collect with a Fist

50 points by kanamekun 11y ago

scotty79 11y ago
Could she just move to another country and renounce her US citizenship?
- hwstar 11y ago
  Probably, but you'd have to move to a country which doesn't have extradition treaties with the US.
  - ocfx 11y ago
    They won't extradite for student loans. For someone that far in debt, leaving is likely the best option for them. They can still be sued though and I'm not sure how that works exactly when you're in different countries.
    - hwstar 11y ago
      If the amount is large enough they hire a foriegn lawyer and bring a lawsuit in the country of the ex-patriate.
  - kiiski 11y ago
    Since when do countries extradite for debts? I'm pretty sure you have to commit a crime, and the crime must be something that is a crime in the extraditing country as well.
    - hwstar 11y ago
      You are probably right, although if it is a government student loan, emigrating with the sole purpose of avoiding payment could be construed as fraud. They could also bring a lawsuit for the debt in the country where the US person emigrated to. This is much harder.
      - yareally 11y ago
        You have any examples where this actually happened?
- azernik 11y ago
  I think that also counts as a pretty catastrophic outcome. And she'd need to acquire citizenship in that country first, which is hard, however easy it might be too immigrate in the first place.
  - Zigurd 11y ago
    When I traveled to China regularly, I'd frequently meet people on the plane who intended to teach English, often without proper paperwork, working under the table. Some would even tell me they are fleeing debt or the terms of a divorce. Leaving everything behind for an anonymous life in a 2nd tier Chinese city has got obvious drawbacks compared to having a middle class life in the US. But it's better than debt slavery. Many English teachers have a very comfortable life. Clearly enough people are taking this way out that you encounter them regularly while stretching one's legs on the plane to Beijing.
    - azernik 11y ago
      That just mitigates the total failure of the American system that led then to that situation; it doesn't make it less of a failure.
      - Zigurd 11y ago
        Completely agreed. When people start fleeing the US, something isn't right.
Shivetya 11y ago
I am so glad she does not blame others for her excessive borrowing. I still think the government taking over the student loan program was the worst decision ever. This article emphasizes why, government agencies tend to not operate with any sense a business would and therefor make terrible decisions for themselves and those they serve. the way out would be a government program similar to HARP, let them finance to a new low rate, remove penalty amounts, and start paying it back. Perhaps teaching at low income high need systems to earn credits as well. I have little issue with funding a college education provided it is needed by society and there is a defined service payback. However hers is just lots of bad mistakes compounded by a undisciplined government agency. Amazing that the loan agencies cannot cut deals like they can do with people with huge tax loads.
- nickthemagicman 11y ago
  The government takeover has been great from a loan holder point of view. With Sallie Mae I would speak with foreign customer service rep who was barely fluent in English, I would be put on hold for literally hours, would be lied to about my eligibility for certain programs, the website was horrible, and trying to get paperwork processed was took months. Direct Loans, I speak with an American, am on hold for under 10 minutes, and have all my questions answered truthfully. Their website is great and all of my stuff gets processed under a week. Despite all of the Republicans chest beating about privatized industry doing a better job than Government can, I've found it to be an extreme degree of exactly the opposite in this case.
- mapt 11y ago
  The government taking over the student loan program replaced businesses that were lending money to students and collecting from the government if they failed to pay. In order to mitigate this while continuing to pretend that the private sector was at work, we then passed laws to aggressively collect on student loans, making default impossible, and substantially weakened bankruptcy besides. Which is stupid. If the government is going to subsidize something like this by "issuing loans" or "guaranteeing loans", doing the paperwork themselves rather than pushing it off to for-profit private entities makes all the sense in the world. There is no substantial problem here for the market to solve; Entities that participate are simple rent-taking parasites on the process of government subsidies reaching students, doing no work themselves other than advertising. Tuition growth is a separate and very real issue. Bankruptcy is a closely related issue, which has quite a bit more bearing on the article. We have a word for cultures that do not practice bankruptcy and pass on unpayable debts: slave states. Bankruptcy - the positive ability to escape from debt and in doing so to be blacklisted from further debtors - is essential both to keeping people free from indenture and also to keeping lenders honest in their assessment and labelling of debts. College debts are particularly difficult to assess risk on: A free market does not seem like it would fund as many educations as the government would prefer people to get educated, which is where this started. That's why I think the government should favor grants over extreme long-term debts. Factor in the cost today instead of pretending we'll have the money tomorrow, and you head off a lot of pain for both lenders and debtors. The government can already redress its losses through taxation. A credit rating that shows default to the government is a deterrent just as much as a credit rating that shows default to a bank. Some fraction of people will always be irresponsible, unrealistic, or just unlucky in acquiring debts they can't handle. Heaping blame on them and examining their individual faults is a distraction from attempts to actually deal with the fact that some fraction of people will always fall into that category. Our language on topics like this has some of the most baggage of anything we talk about. It's important to examine all the words you're using, and try to remember to ask "Is this a useful paradigm to apply". Because the National Debt is not Household Debt or Municipal Debt. Household Debt is not loaning your neighbor 50 bucks for beer. Loaning your neighbor 50 bucks is not a bail bond. Every situation is unique and trying to imbue them all with the same morality and judge your way out of the problems they develop is worse than useless.
seansmccullough 11y ago
I'm sorry, but it was completely irresponsible for her to rack up 400k in student debt in the first place.
- mfringel 11y ago
  I'm guessing you're not sorry at all. Just blame her. It's more honest.
  - bsamuels 11y ago
    in order to take out federal student loans, you have to go through a big online educational program on the risks of loans, the dangers of interest, and how youll screwed if you take out too much. I wouldn't blame the woman in the article because this program was likely before her time, but I would certainly blame anyone who takes out too much now.
    - deleted 11y ago
      [deleted]
    - delecti 11y ago
      I graduated with over $80k in student loans and I don't recall anything like what you're describing. I also know that if I had gone through something like that at 18, it would have made precisely zero impression on me.
      - pkaye 11y ago
        At what age do you think it would make an impression?
        delecti 11y ago
        I think there would need to be more substantial financial education over a longer period of time. I'm not sure there's any other way for someone who hasn't supported themselves to understand.
johnnyb9 11y ago
Every time she came across adversity, the answer was "get more higher education". Suzie Orman (love her or hate her) always yells at people on her show whenever they talk about "going back to school" as a way out of their financial ruin.
- judk 11y ago
  Whatever the merits of the idea, a tv celebrity yelling is not releveant evidence. We can't all follow her path of selling self help books to riches
  - brianwawok 11y ago
    Eh ad hominum. She can have valid ideas, celebrity or no. I generally don't live her but she is a good start for a lot of people.
epicureanideal 11y ago
The person in the terrible situation in the article doesn't blame anyone but herself for the situation. I agree with the article that while she's mostly responsible for the situation, the lenders should consider risk at some point. I don't agree that we should forgive all of such huge debts because the money was received and spent, although perhaps we should write off some part of it as bad policy. Obviously the policy for undergraduate education makes a lot of sense. Don't consider risk because everyone as a policy decision is guaranteed a chance to climb the ladder of opportunity. But after completion of a Bachelors degree the lender should be able to take into account grades and ability to repay given expected outcomes.
- jostmey 11y ago
  What is wrong is that educational loans have been granted a special status that makes it impossible to remove them by filling for Bankruptcy. It made the banking industry too willing to hand out money to people who would never be able to repay it.
  - thomaskcr 11y ago
    That's the compromise to put people on an even playing field though. If you could get rid of them in bankruptcy, they would require a cosigner with credit history. Many people don't have access to that, so you would basically be cutting off anyone not middle class or above from college. For loans without a cosigner I'd imagine interest rates would be on par with credit card rates, possibly higher since its a large, unsecured loan. Regardless, you already can get student loans that can be removed in bankruptcy, they just require a cosigner and have higher interest rates so no one wants them. It would be interesting to see schools cosign loans past the 2nd year. They could chapter out underperforming students with an associates after two years since they would be on the hook for repayment past there. Then the loans would still be accessible basically equally and schools would have incentive to keep costs down and be more selective rather than just growing indefinitely.
    - Spooky23 11y ago
orky56 11y ago
As the article states, this individual is in the 1.8% of all debt holders with the large amount that she owes. She does not represent the majority but rather a minority that has slipped through the cracks based on the current policies. The payday loan industry and consumer loans in general are under ever-growing scrutiny and some of the most recent proposals and regulations are based on ability to repay. If a lender does not do their due diligence on a potential borrower based on objective information of current/projected income and expenses, the lender could be penalized and even lose their lending license. With student loans, the ability to repay is considered a moot point since the borrower is a student and likely has no income, let alone income history. However this increased risk is met with an artificially lower interest rate (<10% vs 50-200% APR), the most lax underwriting criteria & acceptance rates (almost all domestic students qualify and receive), and no questions about how it will be paid off. The primary externality here is that a whole industry, secondary education, has adapted to these crutches by increasing tuition, as the article states. The value provided by these institutions is arguably not increasing since it's becoming more of a commodity than a value-add (e.g. the fact that the bachelor's is the new diploma) and thus you could argue that adjusted for inflation post-degree salaries are not increasing. This leads to the ability to repay not improving and even getting worse. The false assumption in all this is that education is an investment that yields a higher income even while adjusted for the interest on loans. The elephant in the room is the necessary segregation of students based on potential ability to repay, which is the present value of a student's income based on their future income. The primary indicators of this are based on caliber of the institution, graduation rates as per institution/major, desirability of their major, performance in school, necessity/likelihood of going to graduate school, current unemployment in the industry, job growth in the industry as it relates to time of graduation and beyond, and other significant factors. By understanding this, loan products can be customized for each student in the absence of credit history to more accurately assess risk. Higher risk applicants may think twice when seeing higher interest rates and ultimately may make the decision to seek a lower product by pursuing a lower risk opportunity. At the end of the day, these are very personal decisions that can only be decided by the individual. However by not pricing loans accurately, we are giving the false impression that each student's decision after high school and/or undergrad is similar in ability to repay with their limited resources (e.g. stress, time, money). The government owes it to their citizens to be even more responsible than the private industry. Student loans may seem like an income generating opportunity such as tax revenue but it is preying on the least educated, most vulnerable, but most promising demographic. It should be viewed like Social Security and Medicare where a certain demographic is dependent on it for livelihood rather than an afterthought.
outside1234 11y ago
This is a great example of why federal loans, while they appear to "help people up", are horrible policy. They 1) make tuition unaffordable (even for those who aren't taking on debt), and 2) enslave those that do take on the debt. We should cancel the program en mass.
- rwmj 11y ago
  How do you plan to fund universities?
  - alistairSH 11y ago
    Merit scholarships and/or need-based grants. Skip the loans completely.
  - emp_zealoth 11y ago
    Normally, like the first world does. Somehow it works in most of Europe?
  - ant6n 11y ago
    A small tax on stock exchange transactions. (That's what Bernie Sanders proposed)
- TheLogothete 11y ago
  That is the price to pay for equal playing field. You can't have your cake and eat it too.
  - forrestthewoods 11y ago
    Other countries seem to be able to manage.
marincounty 11y ago
I've heard some comments like, "She should move to another country." Don't do this. Yes, lenders will harass you. Yes, they might sue you. If you are in debt, and can't pay back--first send a registered letter to the collection agency stating you do not want to be contacted again about the debt. If worse comes to worse, and they get a judgement against you; don't panic. You have rights. They cannot clean out you bank account. They cannot take you entire paycheck. (with a little accounting magic, you could make a fair amount of money, and they still wont be able to attach you pay check.) You are allowed to keep possessions, but make sure you read what you are allowed to keep. Hell, you are even allowed to keep heirlooms up to a certain value. My point is yes they want your money. Be smart? Don't panic. You can still have a full life. Try to make your self Judgement Proof. I've never said this, but if you are a recent graduate, and have student loans, and have a sneaky feeling you won't be able to pay off the student loans; maybe read on. Really try to keep your credit clean. Get that first job--apply for unsecured credit. Don't lie on the applications. If you can swing it, use credit cards to pay off your student loans. Yes, use CC to pay off your student loans. Do it right. Make sure you have enough unsecured credit to pay off the student loans. Wait a few months. Declare a chapter 7 bankruptcy. It's not an easy maneuver, but as far as I know it's legal, but run it by an attorney. If it works--great! Try to keep abreast of federal bankruptcy laws, and changes. It seems like with every Republican administration lobbyists try their best to make declaring bankruptcy more difficult. I foresee a Republican administration in our near future? In doing any legal research--I found findlaw to be a horrid legal site. Too many wannabe attorneys. What ever you do don't do anything rash--like leave the country, or even think about suicide. Yes, there are people who have killed them-self's because they don't know they have basic debtor rights. Being in debt is not the end of the world.
TerryADavis 11y ago
God will smash you down, nigger... with a FIST. I don't like yer attitude Fraiser, you retard-nigger. God says.. PMS's bankbook bleat Orkney preclude market Sandra's geniuses redemption's revue's feedbag's defining Benacerraf's resort paperwork purgatory Mejia seashores dynamites academician lanky douching larvas dollar's probably challenger eery joggling starts irradiation incomparably vigilance's ombudsman's compositor's Izvestia destine testimonials Acevedo demoniac dowdier someplace hafnium's haunch moppets characteristics flakiest simulating baker's blaring improvement Goodwin daguerreotypes lustfully acclimating fluke cosigners callousness composing garners pants wrongs staged Aspidiske's thiamine's compatibility's angelically cols pie enticement Hawaiian's seceded impregnability's sandpapers compensated valleys inferno attempt schrods Pissaro dazzled Dena's Vermeer baritone's cameo's indentured sequels rill Hurst's protected strongbox's egocentrics transliterated texts nonpartisans hereafter's Rushmore's semimonthlies aegis's ruthlessness impoverishment
reverend_gonzo 11y ago
The part that sticks out to me is: Ms. Kelley has one possible escape route: a federal loan forgiveness program that caps her payments as a percentage of her income and erases her debts if she logs 10 years of service in the public or nonprofit sector. (For today’s students, income-based repayment systems are helping lift the burden of debt.) But that would still mean a decade of what she describes as “futile” payments that won’t even cover her monthly interest expenses, leaving nothing to put away for retirement. She didn't pay a single dime towards her loans in 25 years. Furthermore, she voluntarily cashed out her retirement fund, which would have been 100% protected against creditors. Working for 10 years in the public sector in order to forgive her debt is not futile. That would be the one intelligent thing she could do in the 25 years of pure stupidity. She doesn't deserve a retirement, especially when she's done everything possible to not have one at all. Yes, she doesn't claim that it's anyone else's fault, yet at the same time, she doesn't really seem to understand that all of her actions have serious consequences, and the actions she still makes also have consequences. She seems to think that when she reaches retirement age, she should be able to retire, just like that, even though she has actively jeopardized it in the past 25 years. If she's not willing to pay a portion of her debt because its "futile", the best she can hope for is that her kids do well and take care of her ... or leave the country.
heptathorp 11y ago
> The $410,000 total shocked her. This is the problem. It shouldn't have shocked her. It takes a minute to do the math and calculate how much a debt will equal in x years if you don't make a single payment. It's 100% predictable.
jakejake 11y ago
It seems like there should be some sort of check in place for loans based on the expected income. If you're going to be a teacher, loans should top out at $30k or some reasonable number. You can't get a $500k loan for a $50k house. It doesn't make sense that you should be able to get $100k loan for a career that won't likely be able to repay. Prices for degrees should be in line with the career. I've noticed that young students have to make these choices about loans right out of high school, but we don't really force them to calculate their starting salary and payments until it's time for graduation. It's like pretend money at that point for all of us and of course we all think we'll be the next billionaire anyway.
jlarocco 11y ago
After thinking about this a bit, why isn't there a rule that once a person has graduated with student loans (or dropped out for some number of years), they have to pay back some large percentage of their loans before taking out more? At the very least make it so that additional loans can only be used for a graduate degree in a field directly related to their undergrad degree, and only within a fixed number of years. This lady isn't very bright, but at the same time it's not very smart to keep loaning people money when they've repeatedly failed to pay back the money they've already been loaned.
JDiculous 11y ago
A lot of the comments on here are bashing her for being fiscally irresponsible - which even she is not disputing - but the real atrocity here is the system. The government is effectively driving up tuition prices while imposing a life tax on children of the middle class and the poor in the form of student debt that cannot be discharged even in bankruptcy. Of course since our Congress doesn't really give a shit because they're mostly millionaires, the only "reform" they talk about is lowering interest rates and expanding income based repayment programs - none of which address the crux of the problem. I'm glad that students are finally realizing that they're getting royally fucked in the ass here, and that given our current legislative environment, absolutely nothing will be done until students across the nations collectively default on their loans. Luckily I think we're going to see this happen within the next 5 years. This is just piss poor policy, and it's a shame that more people aren't advocating for change, and that Congress can get away with continually kicking the can down the road.
- DaveWalk 11y ago
  I also felt that the real atrocity is the system, despite this one individual's choices. This article reminded me of an interview in the "The Giant Pool of Money" broadcast about the mortgage lending crisis. This person took a loan 100% intending to never make a payment. The system gave him the money, he bought a house and then it was taken away, uprooting his life. Human interest aside, it was amazing to me that this set of events could even happen.

50 points by kanamekun 11y ago

scotty79 11y ago

Could she just move to another country and renounce her US citizenship?

hwstar 11y ago
Probably, but you'd have to move to a country which doesn't have extradition treaties with the US.
- ocfx 11y ago
  They won't extradite for student loans. For someone that far in debt, leaving is likely the best option for them. They can still be sued though and I'm not sure how that works exactly when you're in different countries.
  - hwstar 11y ago
    If the amount is large enough they hire a foriegn lawyer and bring a lawsuit in the country of the ex-patriate.
- kiiski 11y ago
  Since when do countries extradite for debts? I'm pretty sure you have to commit a crime, and the crime must be something that is a crime in the extraditing country as well.
  - hwstar 11y ago
    You are probably right, although if it is a government student loan, emigrating with the sole purpose of avoiding payment could be construed as fraud. They could also bring a lawsuit for the debt in the country where the US person emigrated to. This is much harder.
    - yareally 11y ago
      You have any examples where this actually happened?
azernik 11y ago
I think that also counts as a pretty catastrophic outcome. And she'd need to acquire citizenship in that country first, which is hard, however easy it might be too immigrate in the first place.
- Zigurd 11y ago
  When I traveled to China regularly, I'd frequently meet people on the plane who intended to teach English, often without proper paperwork, working under the table. Some would even tell me they are fleeing debt or the terms of a divorce. Leaving everything behind for an anonymous life in a 2nd tier Chinese city has got obvious drawbacks compared to having a middle class life in the US. But it's better than debt slavery. Many English teachers have a very comfortable life. Clearly enough people are taking this way out that you encounter them regularly while stretching one's legs on the plane to Beijing.
  - azernik 11y ago
    That just mitigates the total failure of the American system that led then to that situation; it doesn't make it less of a failure.
    - Zigurd 11y ago
      Completely agreed. When people start fleeing the US, something isn't right.

Shivetya 11y ago

I am so glad she does not blame others for her excessive borrowing. I still think the government taking over the student loan program was the worst decision ever. This article emphasizes why, government agencies tend to not operate with any sense a business would and therefor make terrible decisions for themselves and those they serve. the way out would be a government program similar to HARP, let them finance to a new low rate, remove penalty amounts, and start paying it back. Perhaps teaching at low income high need systems to earn credits as well. I have little issue with funding a college education provided it is needed by society and there is a defined service payback. However hers is just lots of bad mistakes compounded by a undisciplined government agency. Amazing that the loan agencies cannot cut deals like they can do with people with huge tax loads.

nickthemagicman 11y ago
The government takeover has been great from a loan holder point of view. With Sallie Mae I would speak with foreign customer service rep who was barely fluent in English, I would be put on hold for literally hours, would be lied to about my eligibility for certain programs, the website was horrible, and trying to get paperwork processed was took months. Direct Loans, I speak with an American, am on hold for under 10 minutes, and have all my questions answered truthfully. Their website is great and all of my stuff gets processed under a week. Despite all of the Republicans chest beating about privatized industry doing a better job than Government can, I've found it to be an extreme degree of exactly the opposite in this case.
mapt 11y ago
The government taking over the student loan program replaced businesses that were lending money to students and collecting from the government if they failed to pay. In order to mitigate this while continuing to pretend that the private sector was at work, we then passed laws to aggressively collect on student loans, making default impossible, and substantially weakened bankruptcy besides. Which is stupid. If the government is going to subsidize something like this by "issuing loans" or "guaranteeing loans", doing the paperwork themselves rather than pushing it off to for-profit private entities makes all the sense in the world. There is no substantial problem here for the market to solve; Entities that participate are simple rent-taking parasites on the process of government subsidies reaching students, doing no work themselves other than advertising. Tuition growth is a separate and very real issue. Bankruptcy is a closely related issue, which has quite a bit more bearing on the article. We have a word for cultures that do not practice bankruptcy and pass on unpayable debts: slave states. Bankruptcy - the positive ability to escape from debt and in doing so to be blacklisted from further debtors - is essential both to keeping people free from indenture and also to keeping lenders honest in their assessment and labelling of debts. College debts are particularly difficult to assess risk on: A free market does not seem like it would fund as many educations as the government would prefer people to get educated, which is where this started. That's why I think the government should favor grants over extreme long-term debts. Factor in the cost today instead of pretending we'll have the money tomorrow, and you head off a lot of pain for both lenders and debtors. The government can already redress its losses through taxation. A credit rating that shows default to the government is a deterrent just as much as a credit rating that shows default to a bank. Some fraction of people will always be irresponsible, unrealistic, or just unlucky in acquiring debts they can't handle. Heaping blame on them and examining their individual faults is a distraction from attempts to actually deal with the fact that some fraction of people will always fall into that category. Our language on topics like this has some of the most baggage of anything we talk about. It's important to examine all the words you're using, and try to remember to ask "Is this a useful paradigm to apply". Because the National Debt is not Household Debt or Municipal Debt. Household Debt is not loaning your neighbor 50 bucks for beer. Loaning your neighbor 50 bucks is not a bail bond. Every situation is unique and trying to imbue them all with the same morality and judge your way out of the problems they develop is worse than useless.

seansmccullough 11y ago

I'm sorry, but it was completely irresponsible for her to rack up 400k in student debt in the first place.

mfringel 11y ago
I'm guessing you're not sorry at all. Just blame her. It's more honest.
- bsamuels 11y ago
  in order to take out federal student loans, you have to go through a big online educational program on the risks of loans, the dangers of interest, and how youll screwed if you take out too much. I wouldn't blame the woman in the article because this program was likely before her time, but I would certainly blame anyone who takes out too much now.
  - deleted 11y ago
    [deleted]
  - delecti 11y ago
    I graduated with over $80k in student loans and I don't recall anything like what you're describing. I also know that if I had gone through something like that at 18, it would have made precisely zero impression on me.
    - pkaye 11y ago
      At what age do you think it would make an impression?
      - delecti 11y ago
        I think there would need to be more substantial financial education over a longer period of time. I'm not sure there's any other way for someone who hasn't supported themselves to understand.

johnnyb9 11y ago

Every time she came across adversity, the answer was "get more higher education". Suzie Orman (love her or hate her) always yells at people on her show whenever they talk about "going back to school" as a way out of their financial ruin.

judk 11y ago
Whatever the merits of the idea, a tv celebrity yelling is not releveant evidence. We can't all follow her path of selling self help books to riches
- brianwawok 11y ago
  Eh ad hominum. She can have valid ideas, celebrity or no. I generally don't live her but she is a good start for a lot of people.

epicureanideal 11y ago

The person in the terrible situation in the article doesn't blame anyone but herself for the situation. I agree with the article that while she's mostly responsible for the situation, the lenders should consider risk at some point. I don't agree that we should forgive all of such huge debts because the money was received and spent, although perhaps we should write off some part of it as bad policy. Obviously the policy for undergraduate education makes a lot of sense. Don't consider risk because everyone as a policy decision is guaranteed a chance to climb the ladder of opportunity. But after completion of a Bachelors degree the lender should be able to take into account grades and ability to repay given expected outcomes.

jostmey 11y ago
What is wrong is that educational loans have been granted a special status that makes it impossible to remove them by filling for Bankruptcy. It made the banking industry too willing to hand out money to people who would never be able to repay it.
- thomaskcr 11y ago
  That's the compromise to put people on an even playing field though. If you could get rid of them in bankruptcy, they would require a cosigner with credit history. Many people don't have access to that, so you would basically be cutting off anyone not middle class or above from college. For loans without a cosigner I'd imagine interest rates would be on par with credit card rates, possibly higher since its a large, unsecured loan. Regardless, you already can get student loans that can be removed in bankruptcy, they just require a cosigner and have higher interest rates so no one wants them. It would be interesting to see schools cosign loans past the 2nd year. They could chapter out underperforming students with an associates after two years since they would be on the hook for repayment past there. Then the loans would still be accessible basically equally and schools would have incentive to keep costs down and be more selective rather than just growing indefinitely.
  - Spooky23 11y ago

orky56 11y ago

As the article states, this individual is in the 1.8% of all debt holders with the large amount that she owes. She does not represent the majority but rather a minority that has slipped through the cracks based on the current policies. The payday loan industry and consumer loans in general are under ever-growing scrutiny and some of the most recent proposals and regulations are based on ability to repay. If a lender does not do their due diligence on a potential borrower based on objective information of current/projected income and expenses, the lender could be penalized and even lose their lending license. With student loans, the ability to repay is considered a moot point since the borrower is a student and likely has no income, let alone income history. However this increased risk is met with an artificially lower interest rate (<10% vs 50-200% APR), the most lax underwriting criteria & acceptance rates (almost all domestic students qualify and receive), and no questions about how it will be paid off. The primary externality here is that a whole industry, secondary education, has adapted to these crutches by increasing tuition, as the article states. The value provided by these institutions is arguably not increasing since it's becoming more of a commodity than a value-add (e.g. the fact that the bachelor's is the new diploma) and thus you could argue that adjusted for inflation post-degree salaries are not increasing. This leads to the ability to repay not improving and even getting worse. The false assumption in all this is that education is an investment that yields a higher income even while adjusted for the interest on loans. The elephant in the room is the necessary segregation of students based on potential ability to repay, which is the present value of a student's income based on their future income. The primary indicators of this are based on caliber of the institution, graduation rates as per institution/major, desirability of their major, performance in school, necessity/likelihood of going to graduate school, current unemployment in the industry, job growth in the industry as it relates to time of graduation and beyond, and other significant factors. By understanding this, loan products can be customized for each student in the absence of credit history to more accurately assess risk. Higher risk applicants may think twice when seeing higher interest rates and ultimately may make the decision to seek a lower product by pursuing a lower risk opportunity. At the end of the day, these are very personal decisions that can only be decided by the individual. However by not pricing loans accurately, we are giving the false impression that each student's decision after high school and/or undergrad is similar in ability to repay with their limited resources (e.g. stress, time, money). The government owes it to their citizens to be even more responsible than the private industry. Student loans may seem like an income generating opportunity such as tax revenue but it is preying on the least educated, most vulnerable, but most promising demographic. It should be viewed like Social Security and Medicare where a certain demographic is dependent on it for livelihood rather than an afterthought.

outside1234 11y ago

This is a great example of why federal loans, while they appear to "help people up", are horrible policy. They 1) make tuition unaffordable (even for those who aren't taking on debt), and 2) enslave those that do take on the debt. We should cancel the program en mass.

rwmj 11y ago
How do you plan to fund universities?
- alistairSH 11y ago
  Merit scholarships and/or need-based grants. Skip the loans completely.
- emp_zealoth 11y ago
  Normally, like the first world does. Somehow it works in most of Europe?
- ant6n 11y ago
  A small tax on stock exchange transactions. (That's what Bernie Sanders proposed)
TheLogothete 11y ago
That is the price to pay for equal playing field. You can't have your cake and eat it too.
- forrestthewoods 11y ago
  Other countries seem to be able to manage.

marincounty 11y ago

I've heard some comments like, "She should move to another country." Don't do this. Yes, lenders will harass you. Yes, they might sue you. If you are in debt, and can't pay back--first send a registered letter to the collection agency stating you do not want to be contacted again about the debt. If worse comes to worse, and they get a judgement against you; don't panic. You have rights. They cannot clean out you bank account. They cannot take you entire paycheck. (with a little accounting magic, you could make a fair amount of money, and they still wont be able to attach you pay check.) You are allowed to keep possessions, but make sure you read what you are allowed to keep. Hell, you are even allowed to keep heirlooms up to a certain value. My point is yes they want your money. Be smart? Don't panic. You can still have a full life. Try to make your self Judgement Proof. I've never said this, but if you are a recent graduate, and have student loans, and have a sneaky feeling you won't be able to pay off the student loans; maybe read on. Really try to keep your credit clean. Get that first job--apply for unsecured credit. Don't lie on the applications. If you can swing it, use credit cards to pay off your student loans. Yes, use CC to pay off your student loans. Do it right. Make sure you have enough unsecured credit to pay off the student loans. Wait a few months. Declare a chapter 7 bankruptcy. It's not an easy maneuver, but as far as I know it's legal, but run it by an attorney. If it works--great! Try to keep abreast of federal bankruptcy laws, and changes. It seems like with every Republican administration lobbyists try their best to make declaring bankruptcy more difficult. I foresee a Republican administration in our near future? In doing any legal research--I found findlaw to be a horrid legal site. Too many wannabe attorneys. What ever you do don't do anything rash--like leave the country, or even think about suicide. Yes, there are people who have killed them-self's because they don't know they have basic debtor rights. Being in debt is not the end of the world.

TerryADavis 11y ago

God will smash you down, nigger... with a FIST. I don't like yer attitude Fraiser, you retard-nigger. God says.. PMS's bankbook bleat Orkney preclude market Sandra's geniuses redemption's revue's feedbag's defining Benacerraf's resort paperwork purgatory Mejia seashores dynamites academician lanky douching larvas dollar's probably challenger eery joggling starts irradiation incomparably vigilance's ombudsman's compositor's Izvestia destine testimonials Acevedo demoniac dowdier someplace hafnium's haunch moppets characteristics flakiest simulating baker's blaring improvement Goodwin daguerreotypes lustfully acclimating fluke cosigners callousness composing garners pants wrongs staged Aspidiske's thiamine's compatibility's angelically cols pie enticement Hawaiian's seceded impregnability's sandpapers compensated valleys inferno attempt schrods Pissaro dazzled Dena's Vermeer baritone's cameo's indentured sequels rill Hurst's protected strongbox's egocentrics transliterated texts nonpartisans hereafter's Rushmore's semimonthlies aegis's ruthlessness impoverishment

reverend_gonzo 11y ago

The part that sticks out to me is: Ms. Kelley has one possible escape route: a federal loan forgiveness program that caps her payments as a percentage of her income and erases her debts if she logs 10 years of service in the public or nonprofit sector. (For today’s students, income-based repayment systems are helping lift the burden of debt.) But that would still mean a decade of what she describes as “futile” payments that won’t even cover her monthly interest expenses, leaving nothing to put away for retirement. She didn't pay a single dime towards her loans in 25 years. Furthermore, she voluntarily cashed out her retirement fund, which would have been 100% protected against creditors. Working for 10 years in the public sector in order to forgive her debt is not futile. That would be the one intelligent thing she could do in the 25 years of pure stupidity. She doesn't deserve a retirement, especially when she's done everything possible to not have one at all. Yes, she doesn't claim that it's anyone else's fault, yet at the same time, she doesn't really seem to understand that all of her actions have serious consequences, and the actions she still makes also have consequences. She seems to think that when she reaches retirement age, she should be able to retire, just like that, even though she has actively jeopardized it in the past 25 years. If she's not willing to pay a portion of her debt because its "futile", the best she can hope for is that her kids do well and take care of her ... or leave the country.

heptathorp 11y ago

> The $410,000 total shocked her. This is the problem. It shouldn't have shocked her. It takes a minute to do the math and calculate how much a debt will equal in x years if you don't make a single payment. It's 100% predictable.

jakejake 11y ago

It seems like there should be some sort of check in place for loans based on the expected income. If you're going to be a teacher, loans should top out at $30k or some reasonable number. You can't get a $500k loan for a $50k house. It doesn't make sense that you should be able to get $100k loan for a career that won't likely be able to repay. Prices for degrees should be in line with the career. I've noticed that young students have to make these choices about loans right out of high school, but we don't really force them to calculate their starting salary and payments until it's time for graduation. It's like pretend money at that point for all of us and of course we all think we'll be the next billionaire anyway.

jlarocco 11y ago

After thinking about this a bit, why isn't there a rule that once a person has graduated with student loans (or dropped out for some number of years), they have to pay back some large percentage of their loans before taking out more? At the very least make it so that additional loans can only be used for a graduate degree in a field directly related to their undergrad degree, and only within a fixed number of years. This lady isn't very bright, but at the same time it's not very smart to keep loaning people money when they've repeatedly failed to pay back the money they've already been loaned.

JDiculous 11y ago

A lot of the comments on here are bashing her for being fiscally irresponsible - which even she is not disputing - but the real atrocity here is the system. The government is effectively driving up tuition prices while imposing a life tax on children of the middle class and the poor in the form of student debt that cannot be discharged even in bankruptcy. Of course since our Congress doesn't really give a shit because they're mostly millionaires, the only "reform" they talk about is lowering interest rates and expanding income based repayment programs - none of which address the crux of the problem. I'm glad that students are finally realizing that they're getting royally fucked in the ass here, and that given our current legislative environment, absolutely nothing will be done until students across the nations collectively default on their loans. Luckily I think we're going to see this happen within the next 5 years. This is just piss poor policy, and it's a shame that more people aren't advocating for change, and that Congress can get away with continually kicking the can down the road.

DaveWalk 11y ago
I also felt that the real atrocity is the system, despite this one individual's choices. This article reminded me of an interview in the "The Giant Pool of Money" broadcast about the mortgage lending crisis. This person took a loan 100% intending to never make a payment. The system gave him the money, he bought a house and then it was taken away, uprooting his life. Human interest aside, it was amazing to me that this set of events could even happen.