And So I Go: Yesterday, Today and Tomorrow

Posts Tagged ‘student loans

Hollow Victory Against ACORN

This is so typical of actions by both parties  in that they tie a lousy bill to a good bill and it is take it or leave it.  And so this is how a lot, even most, bad bills get passed!

Defunding ACORN is certainly good.  The government taking over the funding of all student loans (with the attendant bureaucracy)  is problematical to bad.   I say problematical because I hate seeing students taken advantage of by private lenders as they have been over the years, but when the government steps in as they did in 2007 to try and curb some cost the private lending dries up.

In 2007, Congress reduced government payments to lenders making federally guaranteed student loans by more than $20 billion — just as credit markets started to seize up, eventually making it nearly impossible for lenders to package student loans into securities and sell them to investors, a key source of liquidity. Since the fall of 2007, more than 180 lenders have exited from all or part of the federal student-loan program. ( according to the Wall Street Journal. )

Which of course means the government has to take over more of the funding if students are to get the loans they need for college.  But the fact is the government getting into the business of financing and helping to finance  college educations is what caused the costs of education to sky rocket out of sight in the first place!  This is fact.  Go back and check the records for the costs of  a college education pre 1970 as compared to now.  Just like health care the education industry has out distanced the rate of inflation in the general economy by double digits every year for 40 years.  Colleges and Universities have become big business on the backs of the young who are told they must have a college degree to get a job and then after they get this  horrendously expensive degree they must face the real world economy where prices and wages have not been in the double digits so they are hung with the life long burden of  making payments to private lenders.  Most only being able to make the bare minimum payment or only the interest payment!

At the same time as I have said again and again on this site and statistics prove it:  our young people are not being educated.  Our colleges and universities going after the bucks have dumbed down education in order to pack in students who are not intellectually suited for a college education.  One of the reasons I left the academic field was being forced by the administration to  grade on the dear old  “dumb-bell” Bell curve.  Remember that one?    My classes  and the amount of  learning done in my classes was reduced to the amount of effort the  students put into learning/study/research over fun and games.  So it is no wonder these students are not qualified for decent paying jobs even with a degree in hand!  Employers  have to carefully hand pick from the new graduates every year and then factor in the two years or so it will take them to give the new employees the training they should have gotten in college.  And this is even from the elite gold-standard colleges and universities.  In point of fact, many small colleges  that are not large enough to get federal research grants offer better educations.

So we have a rotten to the core nationwide organization that has been on the government dole for years  and with their man in the White House were slated to get $8.5 BILLION + from the federal government this year finally having become such an embarrassment for their foul actions that even the Democrats are voting to defund them.  But the bill to defend ACORN is tied to a bill that needs far more work, discussion  and consideration of the consequences than it has gotten.   It IS another government take over of a large part of our economy.  A serious grab for power.  And it will create a entitlement class of people (colleges, universities and academics)  who will be very hard to pry away from the nanny’s breast,  and ever willing to give their homage and their vote to the nanny just as are all of those  in the ranks of those entitled.

(sigh)  Your Federal Dollars At Work.   BB Editorials, Political Cartoons, and Polls from Investor’s Business Daily — Washington’s Tangled Web Of Deception

“Oh what a tangled web we weave, when first we practice to deceive.” —Sir Walter Scott

People are asking: “Is the government so incompetent that it can’t foresee the obvious consequence of its actions?” “Is it deliberately trying to make us worse off?”

Washington taxes us in the way that is well-known to do the maximum amount of damage to us and our economy per dollar of revenue raised. It then spends our money in ways that often do more harm than good.

When it started and where it has come since then.  Not only have the programs  been outrageously expensive for the tax payers many have created a population who believe they are entitled to other people’s money.   And in the case of government getting into the business of student loans that only encouraged colleges to spend more because they no longer had to compete for students; worse yet these student loan programs have  created a whole population in their 20’s. 30’s and even 40’s who are educated, fairly well paid, working poor.  They are poor because of having to pay back huge loans they needed in order to afford to go to college to earn a good living.

Bounty That Backfires

Misdirected federal subsidies since 1965 have bid up the inflation-adjusted price of medical care for everyone.

Since the 1980s, ever-increasing government grants and subsidies for selected college students have induced commensurate increases in the tuition charged by schools. The result has been to leave subsidized students little better off than before and, in the case of everyone else, to make postsecondary education almost unaffordable.

In the name of promoting homeownership, Washington helped cause a mortgage crisis that has put many families on the street. In the name of the environment, the government won’t let us drill for oil — and forces us, instead, to make ethanol out of our food and the Earth’s limited supply of water.

Washington bans most immigrants who have education and skills that would create new wealth in America and make us all better off — but since 1975, it has willfully admitted millions of unskilled immigrants who take from America far more than they add.

Many of these uneducated  immigrants are Muslims who are unable to assimilate and are now trying to change our culture and laws to fit their views which are based on the hate filled Koran.  We and other nations who followed this so-called humanitarian move of bringing immigrants in from war torn countries now have the problems of home grown terrorists!

When our businesses prosper and get bigger, they are penalized with more government regulations and extra taxes. Hard work and success are penalized. So is saving. So is job-producing capital investment. Borrowing and profligacy are encouraged. Washington wants everyone to follow its spendthrift example — and for a long time we did.

Most Americans have, however, now learned about the consequences of profligacy. They are turning toward virtues such as work and thrift — and toward getting good value for their money.

Washington, on the other hand, has not recanted, and it definitely has not gotten any smarter or more trustworthy.

Just as our long-suffering economy is showing some signs of life, raising hopes that it may survive the most recent beating administered by Washington, President Obama and his handmaidens in Congress are rushing to nip this nascent recovery in the bud.

They are preparing to devastate the economy with more taxes and historically high debt-to-GDP ratios (including unprecedentedly high levels of net foreign debt). They are tightening Washington’s chokehold on the manufacturing sector (12% of GDP) and the financial sector (another 8%).

They are also trying to take over the energy sector (6% of GDP) with a Rube Goldberg scheme called cap-and-trade — and to take over health care (another 16%), starting with a phony “insurance” scheme.

The Big Lie

The Obama-Biden administration is apparently guided by a Wikipedia definition of the notorious Big Lie technique: “If you tell a lie that’s big enough, and you tell it often enough, people will believe you are telling the truth, even when what you’re saying is total crap.”

The battle is for America’s future. On one side are the flim-flam artists in Washington. On the other are the people of America who are rapidly catching on to the scam.

After having been gulled for most of the 20th century into thinking that government is a benign instrument for good, Americans are now relearning the lessons the Founders knew so well: Government is a constant threat to liberty and property that must be kept as small as possible, used only for limited purposes and disciplined frequently.

Christian, an attorney, was a deputy assistant secretary of the Treasury in the Ford administration.

Robbins, an economist, served at the Treasury Department in the Reagan administration.

The Washington Independent » School of Hock

I took an informal poll once at a friend of my son’s wedding on just how many still owed on their student loans.  These were all young people ranging in age from 30 to 35  with all of them having been out of school and working and trying to pay off their student loans  for at least 8 years.   I didn’t keep an accurate count of the number of people I asked the question of since it certainly wasn’t a scientific study but just in answer to a comment made the previous night at the after rehearsal dinner.  The comment was, “I can’t afford to get married until I pay off my student loan.  Probably that will be never!”

All but three still were paying off their student loans.   All but three!  And the three who had paid off their loans had gone to community colleges  three year program tech fields.  The rest were four year +  university graduates ranging in fields from teachers to chefs to doctors.

Ex-students have 10 years to pay off their loans unless they are granted extensions.  Extensions which of course raise the interest rate they are paying!   So since most had been out of school 8 years of less I asked how many were up on their payments and would finish paying them off in the required 10 years.  NOT ONE!

Now these kids were not slackers or bums. They were all from good families with good work ethics who were really trying to make something of themselves.  Their families had helped them as much as possible; some even taking second mortgages on their homes.  Still year after year the cost of everything having to do with education went up  from 10 to 25% had put these young people so deeply in debt that paying that debt was simply considered by most to be a lifetime thing.  They were even fatalistic about it and accepted that they would never retire and probably would never achieve the standard of living their parents had.  Parents who had graduated from college in the early and mid 1960’s before the student loan scams began.

It wasn’t exactly an eye opener  for me because I had been raging about the  astronomical rise in education cost  for years.   The reason for this astronomic rise in cost was simple:  the government getting into it!  Any time the government gets involved in anything the price goes up.  Health care is the most evident. I won’t go into  my reasoning but if any one wishes to know  my opinions just check under Health Care in my Categories.   However as much as Health Care has climbed at double digits annually since Johnson’s Great society usher in Medicare, education cost has been escalating at a much faster rate. This has largely gone unnoticed because the government doesn’t pay for the educations of our young people except with the well known Pell Grant.  No, the government merely  “subsidizes” the student loans, or pays the lowest interest until the six months after the student graduates at which time the student must begin payments himself.  The loan itself is made by a private bank.  Banks tend not to approve subsidizes loans for any great amounts, preferring to move the students into an “unsubsidized” federal Stafford loan where the interest is not paid by the government but is added to the loan balance month by month  waiting for the student to graduate, get a job and begin repaying the loan.   In other words, the biggest rip off in American history! Bernard L Madoff  has nothing on the legal student loan industry.

(An aside here:  one other issue that had been bothering me became clear with these young peoples revelations; I wondered why people no longer dated.  They just all sort of “meet”  and enjoy the evening together and then go their own way, or otherwise.   What had happened to dinner and a movie?   What ever happened to the large formal dances on campus?   Was the high school Senior Prom the last official “date” these people ever planned to have?     Well, the answer was clear, they simply couldn’t afford to date unless it was a Dutch affair with both partners paying their own way.   So you see, the student loan program not only put a generation of young people in debt for life it even changed social interactions and social morals as well.  Instead of “steadies”  young people now have “hook-ups”!)

One of the very few things President Obama is trying to do right is to reform the student loan program that has made debtors of a whole generation of people.  But due to the big power players involved it may be that his efforts will be blocked by a campaign money hungry congress  who are willing to sell out their constituents to the highest bidder.

The student loan industry is big business. A total of $89.5 billion in loans was originated in the 2007-2008 school year, $22.5 billion of which was in the form of private loans. For students, the stakes are even higher. The default rate on student loans climbed from 5.2 percent to 6.9 percent in only a year, and analysts say the number is likely to rise as the recession continues.

Image by: Matt Mahurin

Image by: Matt Mahurin

The amount individual students borrow is rising, too. The average graduate of a four-year college accrues $22,500 in student loan debt, according to the National Post secondary Student Aid Study . Education advocates say that recent grads and current students are going to bear an increasingly heavy burden when it comes to repaying those debts both because of the growing amounts borrowed and due to the increasing reliance on private loans. For the 2007-2008 school year, 14 percent of students took out a private loan, compared to only 5 percent in the 2003-2004 school year.

Since the amount of federal loan money a student can borrow is capped, many have turned to private loans to bridge the gap, especially as the cost of college tuition has risen steadily in recent years. “These lenders have borrowers over a barrel,” said Edie Irons, communications director for the Institute for College Access and Success. “They can be uncompromising.” Even in the case of death or a work-ending disability, she added, private lenders still seek to collect.Private loans also cost more, sometimes much more. Interest rates are generally variable and several percentage points higher than those for federal loans. Add in a missed payment and default rates of up nearly 20 percent — as much as some credit-card interest rates — kick in. In addition, private loan rules about late payments are nearly always stricter; while it takes months of non-payment to be declared in default of a federal loan, private loans can move into default after only a single missed payment, damaging the borrower’s credit. Since employers in some fields have recently embraced credit checks as part of pre-employment background screening, missed student loan payments could potentially damage a new grad’s chances at a job that would allow them to make those payments.

Nothing is sure but death, taxes and student loan payments!

Student loans are one of the very few types of debt, along with child support and some taxes, that are virtually impossible to have dismissed in bankruptcy. In the case of private student loans, although these lenders aren’t governed by the caps on loan amounts and interest rates imposed on their federally-backed counterparts, they still receive the benefit of the bankruptcy exemption.

(These same bankers can get themselves or the companies in debt and claim bankruptcy and have their loans totally or partially forgiven.  Not so the young people they have scammed.  BB)

College Cost Reduction and Access Act of 2007 give students clemency on some loan debt if they go into public service or work in low-income fields, but it only applies to government-backed loans. The Higher Education Opportunity Act of 2008, for instance, required for the first time that private lenders spell out in plain English how much students will be paying in interest and what kind of penalties are levied for missing payments; however, it doesn’t go into effect until next year“That’s not going to keep [lenders] from making bad loans,” said Deanne Loonin, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. “It’s just going to require them to tell people when they make bad loans.” Loonin says the legislation is a good start but limited in its scope because it only affects future would-be borrowers, not the many students and new grads currently saddled with cumbersome loans. “Going backwards, you still have all these people who are stuck. We also would like to see some relief for those people.”

Unfortunately Obama’s rubber stamp congress who are willing to put the  citizens of this country in debt for  at least the next three generations  are also quite willing on this issue of helping those citizens  are not so willing to rubber stamp the President’s  proposals.

In the tug-of-war over who gets control of these billions of dollars in student debt, industry supporters invoke the specter of massive job losses as an objection to the government’s plan to phase out the middleman in federal loan programs in favor of a direct lending system.With a new president who has already taken aim at education financing via a plan to phase out private loan programs and handle financing directly through schools, lenders are on the defensive. The administration’s plan for overhauling student lending is facing a fight both from Republicans as well as from within its own party — a measure of how far the industry’s fund raising efforts extended. “The fact that they were lobbying so heavily is indicative of the concern they had last cycle,” said Krumholz. “It appears it was perhaps justified given what they’re facing now. They may have seen the writing on the wall.”

I hope the hand writing is on the wall but I really don’t expect much.  BB

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