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Obama Forgives Student Debt Of 400,000 Americans
- spoiledtechie 11y agoWTF. What ever happened to if your able, then you can work. Wow.
- jofer 11y agoThis is specifically for people who are completely disabled, can't work, and are _already_ eligible to have their loans dismissed. All it does is reduce the amount of paperwork required.
- hardcandy 11y agoThis applies to people who can and do continue to work. You just need an SSI status that isn't likely to be resolved within X period of time. I believe depression and anxiety disorders are the most common cause of lifetime disability. Here's a comment from a Reddit thread yesterday, which mirrors my experience: https://www.reddit.com/r/news/comments/4eij5y/obama_to_forgive_the_student_debt_of_permanently/d20ps9o https://www.reddit.com/r/news/comments/4eij5y/obama_to_forgi... I have friends from high school who are on SSI for depression and continue to work for extra income. They're mostly lazy and none of them live what we'd think of as awesome lives. But I wouldn't in a million years think of them as anything close to permanently disabled. If someone put foot to ass they'd be capable of supporting themselves and probably better off and happier in the long run for it (which is a whole different discussion entirely).
- abalashov 11y agoThis aligns with my experience and observations as well. The other thing is, with the evisceration of "welfare" (AFDC) and its replacement with TANF in the Clinton years, http://www.theatlantic.com/business/archive/2016/04/the-end-of-welfare-as-we-know-it/476322/ http://www.theatlantic.com/business/archive/2016/04/the-end-... ... SSI disability benefits have basically become the new "welfare", for those "lucky" enough to qualify. As you rightly noted, barring a real physical injury, the most probable pathway for the largest number of people involves psychiatric and emotional issues. I'm not one of these right-wing "just get a jerb!1" populists, nor am I alleging widespread fraud. I don't doubt for a second that most disability benefit recipients really do have psychiatric encumbrances to work. Your account just happens to be a situation to which I've been repeatedly exposed: > They're mostly lazy and none of them live what we'd think of as awesome lives. But I wouldn't in a million years think of them as anything close to permanently disabled. If someone put foot to ass they'd be capable of supporting themselves and probably better off and happier in the long run...
- zuminator 11y agoMy experience is that a great many people with the type of depression and anxiety disorders that get them placed on SSI are really not capable of holding a full time job. Many of them are prone to emotional outbursts, can't follow simple directions, engage in self-sabotage, can't keep appointments, have bizarre delusions about the way the world works, and are chronically addicted to drugs and/or alcohol. They might be able to do occasional part time stuff on a freelance basis, but they are not long term employable. In the past such people would end up in skid row or locked away in a mental health facility. To put it another way, I consider myself extremely lazy. Yet as much as I hate working, there's no way in hell I'd trade having a job for the hopeless subsistence existence of an SSI recipient. We're talking less than $20k/yr even in a high cost of living state. One is not allowed to save more than $2,000. If someone's judgment is so impaired that they see this as a fruitful voluntary life plan, then the workforce is better off without them, in my opinion.
- jonknee 11y agoI know it was tucked way down in the second sentence, but hey: > The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven.
- bitchypat 11y agoI'd like to know how they are identified. Is it just because they've checked a box along the way? I'm relatively certain these people will not be required to submit a doctor's written diagnosis of whatever causes their total and permanent disability. It will probably be more like the gov sends a form to a list of people (aggregated somehow), and if they fill it out and return it, then they get to legally avoid their loan obligations.
- niccaluim 11y agoThat is also explained in the article. They matched loan data with Social Security disability data.
- djloche 11y agoFrom other discussions elsewhere, in order to qualify for this designation, it seems as if you have to have a significant disability that permanently disables you. Eg. It's not enough just to lose an arm and a leg, you have to be disabled in such a way that (current) prosthetics cannot restore your ability to work. Of course, those are the standards/rules/regulations, but knowing the vast corruption within the US .gov, what actually happens is probably a different story.
- Sanddancer 11y agoThe article says that these people were identified by asking the Social Security department who in a list of people with outstanding college loans had already been diagnosed by a doctor with a permanent disability. They're basically taking out a huge pain in the ass of these peoples' lives in having to fight for this.
- jhspaybar 11y agoGlad to see our government reaching out to folks eligible for help that may not realize it. If anything, this doesn't go far enough. Student loan debt should be able to be discharged in bankruptcies!
- JonFish85 11y agoMaybe, maybe not. If you restrict it too far, loans won't be made to people who need it. What bank wants to lend $100k to a student who is going to graduate, declare bankruptcy, then get a $150k/year job with no liabilities? Obviously it's a contrived example, but the real trick of all this is lending money to someone with no assets. Somehow you have to pay for those who can't pay on their own: either interest rates go up, number of loans goes down--neither of which is particularly good outcomes.
- ikeboy 11y agoLess loans means less people go to college and the price drops. If you think college is overrated and expensive, that might be a good thing.
- jhspaybar 11y agoI think both of the outcomes you suggest, rates up and number of loans down is likely. This would pretty much have a direct impact on the cost of tuition as well it seems, which you seem to have left out of the list.
- pitt1980 11y agobankruptcy isn't exactly a get out of jail free card I'm not an expert in this area, but I suspect if you're interested in qualifying for a mortgage in the future, bankruptcy is something you should think twice about I'm not opposed to student debt having somewhat different standing from other types of debt in bankruptcy proceedings but I think playing with the mechanics of what moving around the standing of student debt in bankruptcy proceedings would do, is probably a fruitful avenue to explore as a society ---------------- I'm not sure making it harder to take out 150-200K in student debt might not be a step in the right direction, even if that's politically hard
- jeffdavis 11y agoAs with medicine, college is now an industry with third-party payment and no third-party control. In other words, the student (patient) and the university (doctor/hospital/pharmacy) agree to do business, and the government (insurance company) pays regardless of the price. That obviously creates major price distortions. Expect college to get a lot more expensive before it gets cheaper.
- api 11y agoThis happens to any good or service that everyone needs but that we stubbornly refuse to fund publically.
- nickff 11y agoNo, most items which people want or need are provided through private exchange, and the prices do not spiral out of control. Examples of this include computers, televisions, food, and clothing.
- bmj 11y agoI'm not sure that everyone needs to go to college. Does a plumber, or electrician, or some other craftsperson that can learn via mentoring really need to spend fours at university? I don't really think so. That's always been my beef with the "college for everyone" movements. That instantly de-values jobs that don't require a college education.
- beeboop 11y agoIt's nice to see the paperwork hassle removed for something like this, but the cynic in me can't help but think of the bank executives all across the country popping corks on champagne over the multibillion dollar lump sum settlement on loans that would have otherwise only trickled repayments in as people manually filed paperwork. Essentially this means they're earning millions on the billions that they can now reinvest immediately.
- ikeboy 11y agoThese are federal loans.
- beeboop 11y agoMy understanding is that there is a significant chunk of federal student loan debt still owned by banks, and the older debt (pre 2010) would be more likely to be in default due to permanent injury/disability.
- ikeboy 11y agoI found https://www.tuition.io/blog/2011/11/so-who-the-heck-owns-my-student-loan/ https://www.tuition.io/blog/2011/11/so-who-the-heck-owns-my-... >Guarantor. Up until 2010, many federal loans were issued via the FFEL program, where private commercial lenders (i.e., banks) issued federally-guaranteed loans. An act of Congress in 2010 eliminated the FFEL program, so now all federal loans are issued directly by the U.S. Department of Education’s Direct lending program. So no banks were at risk anyway, everything was guaranteed by the feds.
- readams 11y agoFederal student loans are zero risk to banks under all circumstances since they cannot be discharged in bankruptcy and the government guarantees the loan.
- sremani 11y agoThere are laws in some countries barring governments from declaring welfare schemes in an election year. I hope this is not Election year pandering.
- thebooktocome 11y agoLast I checked, Obama is not running for re-election, and it'd be hard to spin this as a democratic party decision. Also, he's enforcing a current law (loan forgiveness for total disability), not making a new one.
- sremani 11y agoThis may be a new thing in US or perhaps the motivations are benign. Where I come from every election cycle starts with a parade of sops and welfare schemes targeting "weaker sections". Its hard not to be cynical about such things, irrespective of the party affiliation or leadership.
- tdb7893 11y agoI think it's more he's trying to get some stuff done before he leaves
- wmeredith 11y agoObama's not up for re-election.
- koder2016 11y agoTranslation: money got redistributed from net tax payers to net tax non-payers.
- rm_-rf_slash 11y agoThat's a funny way of saying "people who are disabled are no longer going to be shaken down to pay student loans they have no way of paying."
- loco5niner 11y agoI have my doubts about how many of these "disabled" are really "disabled". Certainly some are. Certainly some are not.
- toomuchtodo 11y agoBetter we wash away a bit of fiat we shouldn't have then screw people who have already been screwed enough by being disabled.
- wmeredith 11y agoAh yes, remember: the poor people have your money: http://www.ibtimes.com/panama-papers-corporations-shifted-half-trillion-dollars-offshore-tax-havens-2012-2351814 http://www.ibtimes.com/panama-papers-corporations-shifted-ha...
- thebooktocome 11y ago"All translators are traitors." -- Italian proverb.
- pklausler 11y agoWell, "Traduttore, traditore" is a Tuscan proverb -- which has been translated! Oh, the irony.
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- zkar 11y agoWho is eating this loss? Government? Individual tax payers? Someone or some entity must be losing this $7.7 billion.
- beeboop 11y agoFederal student loans are guaranteed by federal government. So the federal government is losing the $7.7 billion.
- sremani 11y agoSallie Mae or US Treasury - I am sure the banks would be made whole again. I am of mixed views here, because a Student Loan is technically is a permanent burden unlike other loans.
- mikekij 11y agoWell, since the federal government appears to be making a sizable profit off of their student loan business, I'd say that this $7.7B will just come off their "balance sheet". http://www.politifact.com/wisconsin/statements/2015/oct/01/elizabeth-warren/uncle-sam-track-make-66-billion-profit-6-years-stu/ http://www.politifact.com/wisconsin/statements/2015/oct/01/e...
- mywittyname 11y agoA federal law was passed in 2010 that required all student to originate from the DoE, giving them a monopoly on the juicy, high interest, high balance, zero risk loans given out to millions of Americans each year. Because of this, the DoE rakes in billions a year in profits from student loan interest. So this $7.7 could hit their bottom line and barely move it. http://www.bloomberg.com/news/articles/2015-12-11/a-144-000-student-default-shows-who-profits-at-taxpayer-expense http://www.bloomberg.com/news/articles/2015-12-11/a-144-000-... It's possible that this was the first step in a plan to gradually unwind the student loan crisis. I'm sure that changing the repayment rules while commercial lenders owned most of the student loan debt would cause a massive backlash.
- arca_vorago 11y agoI have a theory that a properly functioning "mercantile capitalist" system requires debt jubilees at regular intervals. Hammurabi was on to something with debt jubilees and writing the law in the common tongue instead of the priests tongue.
- rm_-rf_slash 11y agoI am glad this measure exists for the disabled Americans being shaken down to pay down loans they cannot pay or have dissolved in bankruptcy. However, as a professional with student loans, I will be furious until the day I pay off my final loan at the 6.55% I am paying. I could get a car for cheaper. And it is doubly ridiculous that federal loans can be farmed out to private companies, which, spoiler alert, exist to make profits, not an educated workforce! As much as I would love to stop paying $300 every month (and every tax refund till 2020), I am not that distressed about paying back an expensive and lucrative education. However, the use of private companies charging usurious rates is simply wrong.
- jonknee 11y ago> However, as a professional with student loans, I will be furious until the day I pay off my final loan at the 6.55% I am paying. I could get a car for cheaper. And you should be able to get a car (or house!) for cheaper because those are items that can be sold to cover the outstanding loan balance. Secured credit is always cheaper.
- rm_-rf_slash 11y agoSo should I try and sell my experience in a Shakespeare class on the cheap? My professor was pretty terrible.
- joeblossom 11y agoIt'd be one thing if student loans were true unsecured debt but they're not. The government backs most student loans (even private ones) and they are not dismissible through bankruptcy. So, in some ways they're more "secure" than a car/house/etc. https://enlightenme.com/secured-and-unsecured-debt/ https://enlightenme.com/secured-and-unsecured-debt/ (there is a mountain of other resources on student loan debt and how it differs)
- ctlby 11y ago> I am glad this measure exists for the disabled Americans being shaken down Silly hyperbole. They're simply being asked to pay for a product they consumed. > the use of private companies charging usurious rates is simply wrong. Sounds like your complaint is less with "usury" than with private enterprise.
- readams 11y agoGovernment-guaranteed loans are a fantastic way to force prices to spiral out of control. The way student loans were before income-based repayment, we'd have expected college cost to rise until it meets the lifetime expected benefit of college discounted to the present. With income-based repayment, where your loan balance is forgiven after 20 years, there is no limit to how high it can go. Government-subsidized mortages and mortgage interest deductions have a similarly terrible effect on housing, a basic good that government policy should try to make as cheap as possible. Instead, government policy is to make it as expensive as possible.
- rm_-rf_slash 11y agoOn the other hand, government guarantees expand the available credit to consumers who would be just as likely to be shut out of homeownership (for example) by higher interest rates, save for a thunderous government program to ensure housing for every citizen. With the exception of the subprime mortgage crisis, it is usually a good way to help people become homeowners without too much taxpayer burden or onerous bureaucratic micromanagement.
- readams 11y agoThat's exactly the sort of thinking that leads to this sort of problem. When you consider only first-order effects, many very bad ideas seem like a good idea. When you consider that all policy choices have second-order effects and unintended consequences, you can make more intelligent policy decisions.
- rm_-rf_slash 11y agoAny policy can result in negative n-order effects as time passes. Postwar housing policy mostly worked well (if you were white). The global population was smaller and the devastation of Europe and Japan made America the sole economic superpower. So what makes sense (and actually gets hammered out by perennially bickering politicians) in the 50s might make sense today, it might not. But nothing in politics is correct forever. Just saying "consider second-order effects" without concrete evidence or a plan to mitigate changes in technology/laws/markets/social norms doesn't really add value.
- homulilly 11y agoThis title is incredibly misleading. All the Obama administration is doing is providing a streamlined process to people who are already eligible to have their debt forgiven. For the people moaning about "wealth redistribution" or wasting taxpayer money: These are people who are already unable to repay their loans. If anything this will save money since it will cut down the overhead from the government garnishing social security checks to repay its self (which would be laughable if it wasn't happening to real people).
- jeffdavis 11y ago"already eligible to have their debt forgiven" Without checking their documentation through the normal process.
- niccaluim 11y agoTheir documentation has already been checked by the Social Security Administration.
- andrewpi 11y agoAn agency that is in the middle of a scandal involving fraudulent disability adjudications: http://www.washingtontimes.com/news/2016/apr/11/social-security-still-paying-potentially-bogus-dis/ http://www.washingtontimes.com/news/2016/apr/11/social-secur...
- jayd16 11y agoEveryone is so high up on their soap box they can't seem to make out the text of the article. Has nothing to do with new monies being distributed. This is just the government proactively filing out the paperwork for currently eligible people. Of course if you read these comments its obvious forgiving loans to the disabled is going to skyrocket education prices. /s
- jeffdavis 11y agoEducation is cheap. Teachers aren't often paid very much, good books and other materials are usually not very expensive, and a building is just a building. Labs can be pricey, but only required for some subjects. So universities are like expensive social clubs that build your network and enhance your social standing, and they also happen to teach. Remember that when it becomes a "need" that should be "accessible to everyone". The community college system is great. Cheap, available to everyone, and high quality teaching (in my experience). Why not allow them to handle education up to a bachelor's degree and universities can handle the functions of research and undergraduate social club for people who can pay? One compromise approach would be to deny federal loans (or undischargable private student loans) for university until they have completed all the relevant classes at a community college (possibly with loans). (And no, I don't think community college should be free. I think that will destroy them.)
- sago 11y agoI almost agree, but this: universities are like expensive social clubs, I think glosses over the source of their unique position. Their monopoly comes from them being the de facto certification authority (not just de-facto - many professions have statutory licensing requirements, making them a government-enforced authority). You don't (normally) go to university to get an education, you go to get a degree. Universities will grant you the degree, but they require you to buy their in-house very very expensive education packages first, whether or not you need them. If I could ace every final exam tomorrow, I'd still have to pay for all the courses, for all that totally superfluous education, before they'd certify me. This will not change until universities are no longer both the certification authority and the education provider. Only then will they have to actually compete on whether they are (as they claim) the most cost-effective way of being educated to a required standard.
- seizethecheese 11y agoThat universities are expensive social clubs, and have a monopoly on the certification process are not mutually exclusive. The certification is a stamp of approval from the expensive social club. The value of certifications vary wildly depending on how exclusive the social club.
- jkot 11y agoThere should be a cap on goverment guaranteed loan, perhaps $20k.
- snuxoll 11y agoThere are already lifetime and per-year limits on DoE loans.
- jpmattia 11y agoBoy are those debtors going to get a surprise when the 1099 comes for forgiven debt. (they mention trying to eliminate the tax burden for the disability folks, but no mention of anybody else.) Edit: Or in plain english- the IRS thinks forgiven debt is income.
- rdtsc 11y agoThey might be able to legislate that away as well though, i.e. funds that schools can prove they've received as payment of tuition and other approved things (book?) to be tax exempt. The discrepancy (i.e. funds used to travel to Europe for fun) instead of paying for courses, will become income.
- jpmattia 11y agoSure, but it will literally take an act of Congress to cause an exemption. The only time I can think of it happening previously was during the housing meltdown. Normally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle. It was waived for a year or two. (There was no attempting for "how" the money was spent. So loading up on toys and not paying the mortgage was a strategy that got rewarded (assuming you enjoy the stress of default.))
- rdtsc 11y agoIRS part of the US Treasury, an executive dept. But yeah, I guess it doesn't mean that POTUS can just make up random new laws under guise of executive orders. It seems Congress and Judicial have powers to override / counter-legislate
- abalashov 11y agoNormally a short sale/walking away from a house results in a 1099 for the unpaid mortgage principle. Heh! If only! It depends on whether your equity is positive. If by chance you owe more on your house than it's worth (i.e. the outstanding principal is not satisfied by the foreclosure sale), there are only about ~11 states in which one can simply walk away. The rest allow a lender to sue you for the difference: http://www.nolo.com/legal-encyclopedia/whats-the-difference-between-recourse-nonrecourse-loan.html http://www.nolo.com/legal-encyclopedia/whats-the-difference-... That's currently happening to me here in Atlanta. I bought a $160K condo at the top of the bubble in May 2007, right before the first wave of subprime-related Fed rate cuts. Because it was a relatively high-interest loan (good for May 2007, when Fed rates were at their peak, but laughable three months later), I still owed $140K on it when I chose to default in 2014-15, and when it was foreclosed in summer 2015, it was sold for $85K. I'm currently being sued by the lender(s) for the $55K.
- software_radio 11y agoOutrageous! I thought we learned that nobody's "disabled" just "differently abled" and they can do _anything_! Why, then, forgive their debts!?
- blackflame7000 11y agoEveryone is created equal, and for those who aren't, the government will make it so.
- morgante 11y agoI don't have a problem with forgiveness for people who are actually disabled. The problem is that in modern America, disability has become a catch-all for anyone who can't find a job they want. With the right lawyer, minor inconveniences will get you classified as disabled. NPR did a great feature explaining the rise of disability as a catch-all welfare tool: http://apps.npr.org/unfit-for-work/ http://apps.npr.org/unfit-for-work/
- bcheung 11y agoMakes more sense to me to allow bankruptcy to apply to student loan debt than to add even more rules and and exceptions to the laws.
- ageofwant 11y agoThere should never have been any debt in the first place. Most of Western Europe provides education for free. Those societies understand that a lifetime of taxes more than adequately repays any debt. Little of the rorting from "education providers" we see her in Australia as well. If fascist corporatism didn't ruin capitalism things may have been different. But as it stands governments have a much better track record to deliver good education outcomes than corporates. And that's saying much.
- dayaz36 11y agoMisleading title per usual. The program to discharge loans of disabled people has always been there. Just made the process easier so more people are aware of the program.
- bizzbuzz 10y agoStudent debts in USA are ridiculous. If I were an American student and really want to study, I would have moved to Europe. Many universities are very good at an incomparable price.