Someone asked for a post on Student Loans, so here’s a huge explainer from the Post. Key points:
- The rate hike applies to Subsidized Stafford loans, which are about 26% of loans given. Subsidized Staffords are given to low-income borrowers and have a rate of 3.4% versus 6.8% on Unsubsidized Staffords.
- The hike is for new loans, so it won’t happen until this Fall.
- Since Congress can’t do shit until there’s a deadline, they haven’t done shit. Fall is like the year 2525 for the do-nothing Republicans. If a man is still alive and woman can survive by then, they’ll probably vote yet another extension.
- Much of this is mitigated by a program called Pay as You Earn which lets borrowers pay 10 percent of their disposable income every month for 20 years. There are a bunch of other income-based repayment schemes which also mitigate the cost of loans.
The income-based repayment was news to me, and seems like a good idea.
MoeLarryAndJesus
Eventually there will have to be some reasonable provision for discharging student loans through bankruptcy. The alternative is going to be a catastrophe.
mistermix
@MoeLarryAndJesus: From what I can tell, the income-based repayment is effectively discharge of loans for those who can’t make enough to repay them within 20 years (or less time, depending on eligibility.) You won’t have to pay back the principal of the loan, or certainly the interest, if you’re not making much money.
skerry
I take issue with the point that it won’t happen until fall. It will affect loans taken for the fall semester, but both of my college-bound children start fall semester in August. Tuition is due in a month. There is not that much time.
raven
@skerry: What do the loan rates have to do with tuition?
Belafon (formerly anonevent)
I’ve got to get loans together for my son, who starts college this fall. He’s gotten scholarships and some (really small) loans, but gotta come up with money to cover the rest.
wenchacha
My daughter signed up for income-based repayment, which helped immensely. I don’t know what hoops you need to jump to qualify, if any. For people going to college for a major that promises all the great rewards except money, it provides a little peace of mind.
A nice thing might be to have some discussion on what the future holds for bright people in search of participating in our economy.
Roger Moore
At some point, we’re going to have to stop thinking about subsidizing student loans and start thinking about how to lower tuition to the point that people can afford it. Subsidizing loans is just another way of siphoning government money to banks and universities.
mistermix
@skerry: The federal government pays the interest on subsidized Stafford loans through the period of enrollment so unless your kid drops out the day after enrolling, this is not an issue.
I assume when Congress gets off its duff it will make the interest rate change retroactive.
I’m not trying to minimize the effect of the uncertainty but you can see why Congress hasn’t done shit–they don’t perceive this as an immediate deadline.
skerry
@raven: Loans are taken to pay tuition.
skerry
@mistermix: The government doesn’t pay the interest on unsubsidized loans. My kids have both subsidized and unsubsidized loans to help pay for school.
Botsplainer
@Roger Moore:
Want to lower tuition? Quit accepting rich douchebag vanity endowments and capital contributions. Every time one of those fuckers do it, they create new long term expenses in terms of maintenance and staffing.
Other methods include unloading a truckload of administrators, getting out of the food business, getting out of providing entertainment.
Schlemizel
Man, I have not heard that song in a hundred years – thank pasta! Nice use of an obscure lyric though 10 bonus points!
currants
These rates are undergrad rates: grad rates are already up there (6.8 for subsidized, 7.9 for unsubsidized, and I have both).
IBR helps, but let’s say you’re a public defender, and you owe, say, law school plus undergrad debt, and you are on IBR. You can do that for 20 yrs, but the interest keeps accruing, and good luck trying to buy a car, or house (ever).
Jockey Full of Malbec
@Botsplainer:
And, dare I say… sports?
Xecky Gilchrist
How many dbag Boomer-or-older congressmen have stood up and bloviated so far that this is all the fault of these lazy kids not getting paper routes like they did?
raven
@skerry: I realize that but are the rates locked in when you take the loan?
Eric U.
@Botsplainer: just like our major corporations are now in the business of executive compensation, the universities have learned the same trick. The only thing is, there are no stockholders around to even take notice. After Graham Spanier tried to destroy Penn State, it came out he had more than quadrupled his own pay since he started. And there were retrospectives about him that said he built Penn State into a world class university. When the rest of the university got no raises, he got a bigger raise than normal because “he was doing such a good job.”
The effect of so many administrators is immense class sizes. This has made people think that online classes are probably just as effective. Which makes the building spree on campuses look a little ridiculous
gogol's wife
@Botsplainer:
I wish you were a university president!
Urza
While the option to pay a percentage of your income might be the only viable way for people who can’t do loans for whatever reason, its still indentured servitude.
Forced to pay a portion of your income for X years, likely ending up paying far more that way than you would have using loans up front.
More options in the current system are probably good, but it adds to confusion on what any particular person should do. National education system paid for by taxes would be the better option, everyone benefits from an educated society, thus everyone should help pay for it.
Just Some Fuckhead
Too many people are making too much money in the education system, saddling kids with crushing debt loads they cannot repay. This house of cards will fall eventually no matter how many different ways we try to prop it up.
Much like the healthcare bubble.
Tod Westlake
I’m in the income-based repayment plan. I’m so broke my payment has been “zero” for the past two years. Every month, Iowa Student Loan very kindly sends me a business envelope so that I can remit my zero dollars.
Just Some Fuckhead
Or put another way, it’s not the huge loans that are the problem, it’s the fact they are even necessary in the first place.
Villago Delenda Est
A better idea is to fuck over the bankster parasites.
ChrisB
Yes, kudos for the Zager and Evans reference.
Villago Delenda Est
@Botsplainer:
Also, stop hiring assholes who already have government pensions, like David Petreus, at $3000 bucks an hour.
Anna in PDX
@skerry: This. I have to pay the school for my son’s tuition by 8/15. He’s a junior and I just wish congress could get some work done for once.
mistermix
@skerry: Yep, but the interest rate issue is for Subsidized Stafford loans. You (or your kid) will be paying the same interest rate for Unsubsidized loans that they’ve always paid.
Violet
@currants:
This is going to be a societal issue down the road as kids who are college students today get older and want to do the usual adult things–buy a car and a house–and find they can’t. What’s going to happen to housing prices? The automobile industry? Apparently younger people today aren’t buying cars as much already. Is that because of finances or a change in transportation and living habits–increased density, preferences for public transportation and walking/cycling?
mistermix
BTW – I sympathize with everyone paying for college with loans because it fucking sucks.
I worked in a financial aid office at a state university a long time ago (jesus, more than 20 years ago). Back then, the students with need got Pell grants and College Work Study that covered most of their college expenses, and the rest was GSL (Subsidized Stafford), but not much. That’s because school was pretty cheap – total cost of attendance for a year was well south of $10K, IIRC. So even if you took out a GSL, your debt at the end of 4 years wasn’t crushing. That’s the way it should work.
currants
@Urza: Hear, here.
scav
“I owe my soul to the company store” function collectively established and managed by fianancial institutions for the benefit of other corporate entities.
currants
@Violet: Likely both (change in transportation and living habits, AND finances). The other delightful bit is that yes, after 10 years in public interest work (for more than part-time, and for a legit 501c-something org), your loan can be forgiven, or after 20 years in IBR, same, BUT the amount forgiven? THAT is a benefit, and you have to pay TAX on that. http://www.equaljusticeworks.org/ed-debt This org/site has some good info, but I just learned about the tax consequences about 2 or 3 months ago. Yikes.
raven
@mistermix: Remember the BEOG?
geg6
@raven:
They have to accept the loans by then so that they can be applied to their bills.
It should have no effect if the congresscritters make the interest retroactive, which is what they’ve all been saying. The interest does not begin until the loans disburse, which will (for most schools) be late August.
currants
@Tod Westlake: Yes–though the “good” news is that if you’re in public interest work, you can make 120 on-time payments of $0 and have your debt forgiven. Bad news, see comment #32.
Feudalism Now!
The problem is the people who can afford an increase the least are getting hit again for more. Congress will do nothing because the deadline passed, they are under no obligation to reduce the interest rate. There is no political will to remove congress critters over screwing the poor. If anything, it is a bonus among the teabilly set. There is no coverage of this to even gin up a little outrage to light up congressional offices.
Since we talked about student loans, how about a little coverage on the exposure of deeply flawed infrastructure and neglect by the flooding in the Mohawk Valley this past week. $1.5 million to replace 30 motors in the Waste Water treatment plant in Oneida alone. Water mains breaking, roads washing out and houses still under water are from a non-record setting amount of rain. Where is the infrastructure stimulus? Delayed or ignored maintenance is a very large problem and municipalities are not going to raise taxes by the necessary amount to make up for 30 years of neglect.
I am not a kook
Fuck students and their whiny ass loans. I haven’t been a student for some decades so why the fuck are you splitters talking about this nothingburger? Are you fucking trying to distract attention from the fucking most important thing today?
Student loans? Get a fucking job you lazy ass morans.
geg6
@Belafon (formerly anonevent):
All federal loans are small, since Congress only allows students to borrow a certain amount each year, based on the number of credits completed. The maximum for a dependent freshman is $5500, for a sophomore it’s $6500 and juniors and seniors can borrow $8000. All other loans must either be the federal parent loan or a private educational loan. Personally, I recommend the federal parent loan (PLUS). I consider the private educational loans the equivalent to the bad mortgages. At least with the federal loan, it can be forgiven if something fatal happens to the parent or the student. Having had a rash of parent deaths among my students last year, I have seen first-hand how important that can be. The private loans are not dischargeable in the case of death and have the same crazy inability to be discharged in bankruptcy as the federal loans do.
raven
@geg6: Thanks, I’ve still got plenty to pay off but I don’t look at it.
geg6
@raven:
Yes, but the rate may change if Congress so chooses. But it will be locked in after that.
Amir Khalid
@I am not a kook:
I think you just contradicted your own nym.
Violet
I remember reading awhile ago about a no-frills college or university. Very basic dorm rooms with shared bathrooms down the hall, old school style. I think they had a gym for health purposes, but nothing fancy and no big deal sports teams. Not much in the way of extracurricular stuff unless the students put something together themselves. The entire focus was education and the costs were quite low. Can’t remember if it was a wingnut type place–sound like it could be from the description. Just stuck in my head because it seemed like an interesting idea.
When I go back and visit the place I went to college I am always shocked by how much more the students have that we seemed to get along just fine without–fancy gym, dorms with actual bathrooms attached to the rooms, bigger and much fancier student union. I know higher education went through some kind of “keeping up with the Joneses” period where schools were afraid if they didn’t build the fancy this or that it would keep kids from choosing them–so they did build it at significant cost and tuition increase.
I am not a kook
@Amir Khalid: student-enabler!
geg6
@Urza:
While I agree with your end solution, the rest of your post is ridiculous. A loan is not and never has been indentured servitude. And while the loan forgiveness does require payments over a certain number of years, the amount you pay over those years, while more than what you borrowed, will be vastly less for many who would be paying for thirty or forty years without the forgiveness. The income-based and other payment options that the Obama administration have put in place have made repayment and getting out from under these loans much easier for many students. It’s not perfect, but it is a vast improvement over what has been in place since the early 1990s.
MomSense
@skerry:
Same situation here.
I am not a kook
@Violet: Yeah, I think all current dorms should be torn down and rebuilt from the ground up “old school style” so save money and to make the olds feel all fuzzy in their feefees.
srv
What are all these kids thinking, wanting school loans when there are no jobs? Reagan did so much, but even he could not end the age of entitlement Jimmy started with the CRA.
geg6
@Violet:
You must realize that many schools felt forced to built Taj Mahal-like facilities since their states decided to massively cut their funding to public colleges and universities.
My small campus of a major public research university has the old school dorms and, yes, we have a nice wellness center, but most of it was paid for by a voluntary student fee, donors, the campus budget and only a relatively small investment by the university at large. The fee is gone now that the facility is open. But our tuition is still one of the highest among public universities in the nation. The state provides us with less than 8% of our budget.
currants
@geg6: (except… fed grad loans can’t be discharged b/c death or bankruptcy)
rikyrah
thanks for the explanation
comrade scott's agenda of rage
@mistermix:
You just described my school years (1979-1985). In fact, I got thru undergrad debt free. It was grad school (the only option during Reagan’s Great Recession) that I had to go into debt and even then, only came out with $6K in load debt.
Back then I could see where college funding was going and it’s lived down to my expectations. All right wing motivated without thinking about the repercussions as outlined above, ie., no house, no car, etc.
Shakezula
@Roger Moore: Dear me, you don’t think the market will bear endless hiking of tuition rates?
Punchy
10 of disposible income? Who determines whats disposible and whats not?
Roger Moore
@Shakezula:
Yeah, I’m crazy enough to believe that neither health care nor higher education can expect to have costs continue to grow faster than the economy as a whole indefinitely.
Violet
@geg6: I’m sure that every school has a different story about their facilities and how and why they got them and paid for them, although there are probably trends across the country.
mistermix
@raven:
Before my time. But I do remember SEOG – it was pretty limited. It was Perkins Loans, Pell Grants, SEOG, GSL, SLS and Plus when I started.
Mr. Longform
Back in the day, state legislatures and taxpayers actually paid for the state’s universities. Public good, and all that. I went to a big state school, got a pretty good education, and my tuition was (and this was in the ’70s) about $900 for the year. So, all those dipshits in congress went to college on the backs of the taxpayers, and now they want to (surprise, surprise) pull the ladder up. St.. Ronnie began it.
BGinCHI
All public higher eds have had budgets cut deeply over the past 20-30 years, with the largest cuts coming since the 90s. The states (with very few exceptions) have been cutting funding for higher ed while demanding more access and accountability (not that these are bad things in and of themselves, of course).
This is the reason tuition has gone up. Period. Yes, there is administrative bloat. But that is not the cause (it’s mostly an effect of late capitalism and of what comes right before the parenthesis above).
Your state saves money by cutting higher ed and then takes it back from you in the form of tuition. Thanks to the GOP (and in some states, the Dems) we are no longer spreading the burden for education.
Disgusting.
geg6
@currants:
I’m a student aid officer so I’m well aware.
I am of the opinion that grad loans should be more expensive than undergrad loans. I paid cash for grad school cash only. Took me quite a while to do it, but I did.
cckids
@Violet: Finances, mostly, at least according to my 2 college kids & their friends. Some areas & campuses are well served by mass transit, many more are not. It affects their job availability, too – if you have to take 1.5 – 2 hours to ride a bus to get to & from your job, you are less likely to be able to get that job.
cckids
@geg6: Though we’d love to go this way, not all of us parents qualify for the PLUS loans.
Especially those of us taken down hard by combos of the Great Recession & healthcare related bankruptcy.
burnspbesq
If you have kids, start putting as much as you can into a 529 account ASAP. Make compound interest work for you instead of against you for a change. We started when the kid was four.
The kid gets an unsubsidized Stafford and $6k/yr in merit scholarships (schools compete for male dance majors only a little less intensely than they compete for point guards), and we have enough set aside to cover the rest, at a private school that costs $40k/yr.
Shakezula
@Roger Moore: We need more of that brand of crazy.
Pooh
Not sure if this has been covered in comments yet, but IBR is basically a sneaky way of the management class paying itself on the backs of taxpayers and students – 10% is a healthy chunk of income, and the rest gets forgiven, but who gets the money now? The swelling ranks of highly (over) compensated Assistant Deans of Hopscotch Etiquette.
MDW
You’ve got to be careful about taking IBR as anything but a desperation move. You’ll likely be paying less than the incurred interest each month, so the total owed will just keep goingup. If you’re lucky to get a better paying job you’ll be on the hook for full payments again, and if you stick it out for 20 years in a low paying job the IRS will treat the forgiven debt as income and send you a tax bill as large as your annual wage. Plus Congress could take away the program whenever they want, and do you trust the Republicans not to gin up outrage at the “elite moochers”?
The only real solution is to make college loans dischargeable in bankruptcy again, and do something to curb the rising tuition costs. Instead of subsidizing education by sending money through the students and making them pay interest, how about sending it directly to the school if they lower tuition? Or put the school on the hook for some of the defaulted loan so they’ll think about the risk before admitting someone?
pseudonymous in nc
@currants:
True about the interest, but big student loans (as long as they remain in good standing) don’t seem to fuck up your credit score or eligibility for home/car loans in the way that revolving credit might.
Of course, it still means that you’re paying x% of a mortgage payment on top of a mortgage payment, potentially for 20 years. The only way is to deal with that in the long term is to expand the loan repayment for professionals in less salubrious regions and roles that you see on a relatively small scale with the National Health Service Corps. Or to come up with some kind of scaled postgraduate tax like you see in Australia.