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Student loans in default to be referred to debt collection, Dept of Ed says
- josefritzishere 2y agoThere is an element of sadism in this sort of behavior.
- hiatus 2y agoHolding people accountable for their choices is sadistic?
- throw-the-towel 2y agoI'm not American so I may have missed something, but isn't this a huge departure from established procedures which everyone was relying on?
- flerchin 2y agoIf anything, this is a return to normalcy.
- hiatus 2y agoNo. The loans were deferred for a few years. When people took out the loans they did so knowing they would have to pay them back
- 0xfaded 2y agoUnderstood as 18 year olds who were told everything would be okay so long as they just did what they were told. I was lucky enough to grow up and go to university in another country. The magnitude of the financial decisions I was making at the time were < 1k and I remembered how much money that felt like. IMHO blaming people for 100k bad financial decisions made under duress just as they entered adulthood is victim blaming.
- nyarlathotep_ 2y ago> IMHO blaming people for 100k bad financial decisions made under duress just as they entered adulthood is victim blaming. Especially when the implied social contract broke down--i.e low wages, horrific increases in the cost of living, limited opportunities. It's pretty common to find people that regret taking the loans to go to school and got little value from their education.
- hiatus 2y ago18 year olds have enough agency to sign their life away to fight on foreign soil but are too stupid to sign for a loan? Or are you arguing we should raise the age of majority to > 18?
- ru552 2y agoThey only stopped referring to debt collections in 2020 when Covid hit.
- toomuchtodo 2y agoThe debt isn’t real, it could be forgiven. If moral hazard wins, those who can will continue to leave the country, those who can’t will pay this tax, diminishing economic output, and less people will go to college in the future. If we’re going to keep speed running the decline of the US, it’s a fine strategy. The people making these choices will be long dead by the time the consequences arrive.
- andsoitis 2y ago> The debt isn’t real, How come?
- toomuchtodo 2y agoYou’re asking how a line item in a database isn’t real?
- hiatus 2y agoWhy not send me $100k then? It's just a line in a database after all.
- toomuchtodo 2y agoDid you incur that debt because your country is dysfunctional, doesn’t provide education at a reasonable cost, and you were told it was the only path to a good job? Probably not. [argument withdrawn]
- hiatus 2y agoI have plenty of friends that graduated from state schools and incurred no debt, all in the US. Does that invalidate your points about the inability to get an education at a reasonable cost? > I’m sure you’d have no problem burning millions of dollars of VC funding on a low value business idea, as if that would be of superior economic value. You know absolutely nothing about me.
- techpineapple 2y agoSometimes, yes, depends on the context.
- enraged_camel 2y agoDoing it while knowing that it will absolutely wreck them is, yes. Not to mention doing it with such short notice, and when we're on the verge of what will most likely be a serious recession.
- tacticalturtle 2y agoThis has been the plan for months, even during the Biden administration - the plan was to restart in 2025: > “Involuntary collections will not occur before 2025," a White House spokesperson said in a statement. "Defaulted borrowers won’t see collections until 2025.” https://subscriber.politicopro.com/article/2024/10/biden-administration-pushes-collections-of-defaulted-student-loans-to-after-election-00183178 https://subscriber.politicopro.com/article/2024/10/biden-adm...
- smileson2 2y agonot a one way street
- dfedbeef 2y agoCareful what you wish for
- disambiguation 2y agoWhich choice is that - pursuing higher education to have a better life, or being unemployed? What would be your advice to them, what should they have done differently?
- hiatus 2y agoGo to a state school. Go to community college first. Enter a trade.
- fnordpiglet 2y agoNone of these are free or cheap, and I’ll wager bottom dollar the majority of debt holders went to a public school of some sort. In fact student debt is most pernicious for people of lesser means and fewer opportunities, and who most need the debt to make it possible to go to school. These are also the people who are most incentivized to leverage public schools. (Quick google shows 62% of debt is held by public school attendees)
- hiatus 2y agoState school attendees face lower debt burdens than private for-profit schools. I can't find the data you are referring to that 62% of student loan debt is incurred by state school attendees. By these numbers [1], only 40% of public school attendees even incurred debt. [1]: https://www.bestcolleges.com/research/average-student-loan-debt/#school-type-degree-student-loan-debt https://www.bestcolleges.com/research/average-student-loan-d...
- tacticalturtle 2y agoIn my state (Massachusetts) community college is in fact free. In other states, for example Texas, it’s a little over $3000 a year on average for in state: https://www.communitycollegereview.com/tuition-stats/texas#:~:text=For%20Texas%20community%20colleges%2C%20the,is%20approximately%20%2413%2C996%20per%20year. https://www.communitycollegereview.com/tuition-stats/texas#:... That’s much cheaper than the tens of thousands for a public 4 year university. And we should point out that for trades, you are getting paid in an apprenticeship. That’s better than cheap or free.
- hayst4ck 2y agoI've rarely had my hate spiked so highly so quickly by a comment. Many of these loans are handed out predatorily to people classified as children, 6-8 years before their higher level thinking pre-frontal cortex fully develops, with no life experience, little work experience, a wide range in quality of parenting and childhood, with a society that has said "this is how you achieve the American dream of doing better than your parents." The loans themselves shield the lender from consequences and put risk squarely on the the loan taker. The seeming goal of these loans being the same for most of the structure of American society, to ensure desperate workers that have no freedom and no ability to say no to businesses. When society offered these loans to people who in no way would have been able to get them on fundamentals, which was already a failure of society to invest in the future, there was an implicit promise that they would lead to a better life and they didn't. You can't blame societies young for believing what their elders and even society at large tells them. Universities failed their students, society failed students and universities, our own culture decayed in terms of earning vs receiving credentials, and the people you want to pay the cost of that are the people that the system victimized the most?
- Ekaros 2y agoMaybe then ban giving them out for anyone under age of 25. Absolute total ban. Start solving the problem today. Anyone currently taking loans do not get any more of them until age of 25. Seems like most reasonable first step to take.
- toomuchtodo 2y agoRequires Congress to act, which will not occur in its current configuration. If what is reasonable is impossible, it's only a thought experiment. Can consider trying again after midterms in 2026, depending on outcome.
- piva00 2y agoUnreasonable if there are no alternatives to achieve higher education. You start solving the problem by cutting potential opportunities without no replacement scheme for it, only creating bigger problems. There's no easy solution to this, it's structural, it's systemic, the model the USA uses for higher-ed funding is structurally unsound and unsustainable. Replacement the model can only be done through a measured policy change but I don't see much of that coming from the US in the past 10-15 years, it's mostly flailing around with no clear vision for what it wants to be in the future, just an everlasting chase for GDP growth no matter how, at some point this narrow objective comes crashing down.
- oldpersonintx 2y ago[dead]
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- bdcravens 2y agoThis is merely lifting the moratorium on collections that was put into place during COVID, as in, debt collection on student loans isn't a new thing.
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- mingus88 2y agoAnd the obvious question that another poster has raised is why are all the COVID era loans being forgiven then? Shouldn’t all loans be collected? Could it be that many in DC benefited from that free money, and are also benefitting from the status quo of unaffordable education?
- tssva 2y ago"And the obvious question that another poster has raised is why are all the COVID era loans being forgiven then?" And the obvious answer is that the COVID era loans being discussed were designed from the beginning to be forgiven if certain conditions were met. Those that accepted the loans did so with that understanding. Student loans are also issued under specific terms which those that accept the loans agree to. In both cases the government is living up to the terms of the loans when issued and expecting the borrowers to do the same.
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- bsnnkv 2y agoIt's morbidly fascinating to watch the wanton cruelty of a society in such rapid decline.
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- conception 2y ago“Less than 40% of all borrowers are current on their student loans, department officials said.” Hello, 2008, my old friend I've come to talk with you again…
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- arevno 2y agoThe vast majority of these loans are held by the US Government, so solvency risk from delinquencies is not the concern that it was in 2008 with privately held MBS.
- conception 2y agoWell, I’d say the solvency risk is from a significant number of people going bankrupt and still not being able to discharge the debt. I think you’re right it probably won’t be as dramatic but it won’t be great. Especially combined with the various other negative economic actions taking place.
- righthand 2y agoWhy do college students have to continue to pay back their loans when the legislature is bipartisanly comfortable writing off $50k+ PPP day loans per business from Covid Pandemic? [0] [0] https://pppreport.org/ https://pppreport.org/
- Y_Y 2y agoIt may also be a factor that the student loans cannot be discharged through bankruptcy. The government may be afraid of (even scammy) businesses shutting down, but there's no danger with student-debtors.
- Joker_vD 2y agoBecause the legislature is not bipartisanly comfortable with writing off the student loans. Duh.
- monocularvision 2y agoBecause that program was designed from the beginning to be forgiven. It was about keeping businesses afloat during extraordinary times and keep paychecks going to folks. People who compare student loan forgiveness to PPP are not making a good faith argument.
- Volundr 2y agoIt certainly wasn't sold to the public as "these are going to be forgiven". After all they are called loans not grants. And given all the retoric around "it's simple you took out a loan, now you pay it back" or "why should my tax dollars pay for your loan forgiveness" I think it's very fair to why this logic applies to people not businesses.
- monocularvision 2y agoIt was literally in the bill when it passed! What are you talking about? I very distinctly remember this being promoted as part of the package. The deal was “if a business spends a percentage this money on payroll, it will be forgive”. It was designed to keep businesses afloat for a set amount of time as we locked down for COVID.
- rgbrenner 2y agounlike other loans sent to collections, collection costs are added to the loan. the amount varies by loan type, but it’s typically 25%. so for example, if you owe 50k: you miss a few payments, and put into default, the loan is sold.. and you immediately owe 62.5k. they can then start garnishing wages and any tax refunds based on this amount.
- Molitor5901 2y agoIt's like charging prison inmates money for each day they are in prison, which they have to pay when they get out or.. go back to prison.
- epsilonaurigae 2y ago>“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said. I thought she was only hired to shut it down… They wouldn’t just lie to us, guys?
- 9283409232 2y agoShe, like all of Trump appointees, were hired to be the rubber stamp on whatever the Heritage Foundation puts on their desk.
- Molitor5901 2y agoThe easiest and most expedient way to resolve this issue is to a) freeze interest payments on student loans, so long as b) borrowers make timely, reasonable payments. You can't squeeze blood from a rock and you'll only hurt someone in the process.
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- iamleppert 2y agoThe US department of Education took my tax return one year for a remaining balance on a loan of less than $1,000. I never knew about it, and had thought I paid everything off. Well, turns out they took almost $4,000 with all their fees, interest such that had been just building and building for several years. No one had ever tried to contact me via phone, email, etc. for years. The US Department of Education is known for their aggressive collection tactics, including garnishing of wages, taking tax returns and seizing homes and cars. I even heard of a single mother who had her child support taken away because she owed money to a fraudulent vocational school. The US government is openly hostile to those who do business with them, and to their citizens and should be avoided at all costs.
- apercu 2y agoThe US government has seemingly been adversarial to their citizens for a long time. Not just in this, but in extremely onerous and expensive demands, like requiring expatriates to file US taxes - that alone cost me nearly $15,000 over 18 years in tax preparation fees (I'm self-employed). Further, the FBAR reporting requirements. I have retirement money in Canada that makes no financial sense to divest yet, and I spent 5-6 hours filing an FBAR this year because the online form doesn't support OSX at all, and I simply could not get an Adobe Acrobat Reader to install on Apple silicon, so I had to rebuild a crappy Dell laptop in order to meet my legal requirements. Now, I get requiring some sort of reporting requirements to stop tax evasion and the like, but the tax filing requirement is not based on anything like net worth, but rather if you are a US citizen you must file (US is one of I think 2 countries in the world with this requirement). And the FBAR requirement is anything up to or over $10k in a foreign bank. For real? If I sound like I am complaining, why don't you walk a mile in my moccasins. #Edit - fixing an autocorrect typo.
- nradov 2y agoTechnically they didn't take your tax return, they seized the income tax refund you thought you were owed. A tax return is the 1040 (or similar) form you file with the IRS. Regardless of debt collection issues, as a taxpayer it's best to set your withholding so that you don't get a tax refund. A refund essentially means you were giving the government an interest free loan.
- Kon-Peki 2y agoLook, I am definitely NOT making any suggestions here. But you know that debt collectors are using these “lawyer gig worker” platforms to outsource their court appearances, and handing full authority to those outsourced lawyers to do the final negotiations on debt amounts that are entered as court judgements. Just sayin’
- hayst4ck 2y agoJust like social media is the cigarettes of our generation, student loans will be the "preexisting conditions" of it. Student loans are an odious conflict of interest. People will hold themselves in disbelief that we offered predatory "no risk" loans to literal children, burdening their entire futures with decisions made before they had the faculties to consider it. The moral hazard of protecting a class of loans from completely irresponsible lending alone is enough before even looking at the consequences for the people who took them. Then you have second and third order effects... Authoritarians don't consult experts believing they know better so Nth order effects of short sighted policy are authoritarian kryptonite. Nth order effects have a way of asserting themselves into reality and breaking through authoritarian denial about the state of reality and nobody is happy when reality asserts itself.
- Aloisius 2y agoWe should have never permitted minors to apply for federal student loans. Frankly, the direct federal student loan program was probably a mistake. We shifted everything from private loans with federal guarantees to direct federal loans because of the perception that it benefited banks over citizens, but all we ended up doing is shifting animosity from banks to the government. Worse, the easy availability of student loans has made it easy for States to substantially reduce subsidies, shifting the burden onto students while jacking up rates along with private colleges.
- nancyp 2y agoCollege studentsare seen as cancer to the current administration. They used to be sweetheart pawns for the previous administration. This is why financial literacy should be mandatory education in high school so they can make more informed decision while borrowing for college.