Wednesday, 11 June 2014

Student loan | Obama Unveils Student Loan Debt Bubble Bailout | Zero Hedge

Student loan | Obama Unveils <b>Student Loan</b> Debt Bubble Bailout | Zero Hedge

Obama Unveils <b>Student Loan</b> Debt Bubble Bailout | Zero Hedge

Posted: 09 Jun 2014 10:37 AM PDT

"The challenges of managing student loan debt can lead some borrowers to fall behind on their loan payments and in some cases even default on their debt obligation," notes the always astute White House... and so it's time to do something about that... by bailing the bad debtors out with US taxpayers money. As we have been vociferously warning, not only has the student loan debt bubble expanded massively (as the easiest credit substitute for real-world working and unemployment) but delinquencies on the 'easily available' credit is soaring with "consequences such as a damaged credit rating, losing their tax refund, or garnished wages." Consequences, as we have been taught now, are not acceptable for this administration and so President Barack Obama will issue an executive action on Monday aimed at making it easier for young people to avoid trouble repaying student loans.

As we noted previously, the amount of heavily delinquent student loans has just hit a fresh record high of $124.3 billion, up from $121.5 billion in the prior quarter.

So: when does the Fed finally admit i) there is a student loan problem and ii) the only way to solve said problem is to promptly monetize it?

or iii) A Federal Government bailout...

As Reuters reports,

President Barack Obama will issue an executive action on Monday aimed at making it easier for young people to avoid trouble repaying student loans, a White House official said on Sunday.

The president will sign an order directing the secretary of education to ensure that more students who borrowed federal direct loans be allowed to cap their loan payments at 10% of their monthly incomes, the official said.

Federal law currently allows most students to do this already. The president's order will extend this ability to students who borrowed before October 2007 or those who have not borrowed since October 2011, the official said.

The administration says this action will help up to 5 million more borrowers, although it will not be available until December 2015.

More broadly, the administration is looking for ways to stimulate faster economic growth without relying on legislation...

Preventing student loan repayment problems fits with that goal because officials say it will help young workers avoid credit blemishes that will hurt them down the road.

"Many student loan borrowers are working and trying to responsibly make their monthly payments, but are nonetheless struggling with burdensome debt," the White House official said.

"The challenges of managing student loan debt can lead some borrowers to fall behind on their loan payments and in some cases even default on their debt obligation, with such consequences as a damaged credit rating, losing their tax refund, or garnished wages," the White House official said.

Perhaps its time to reassess whether taking on massive indentedness for a degree that leaves you earning minimum wage anyway is a sensible idea.

Now we are sure there will be no unintended consequences from this law... no sudden spike in non-payment, no tumble in loan bundle values, and no collateral chain follow through...

Oh wait...

The number of borrowers in the income-based repayment programs climbed 24% from January through March to 1.63 million, the Education Department recently said.

The amount of debt covered by the programs grew 22% during that period to $88 billion—nearly one-tenth of all outstanding federal student debt.

WTF!

Welcome to the real world, debt serfs...

President Obama said...

  • *OBAMA: RISING TUITION COSTS LEAVE FAMILIES `FEELING TRAPPED'

And we said...

And then President Obama said...

  • *OBAMA SAYS HIGHER EDUCATION `SUREST PATH' TO MIDDLE CLASS
  • *OBAMA SAYS HIGHER EDUCATION IS `SMART INVESTMENT'

And we said...

It's just insane that the administration can make up so much crap - not have a clue how much it will cost.. and the manstream media just glosses over it .. a ha just another bailout for those who over-extended themselves.

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College Is Too Expensive, But Is <b>Student Loan</b> Relief the Answer <b>...</b>

Posted: 10 Jun 2014 09:19 AM PDT

Megan McArdle, despite her own experience with crushing student debt, doesn't support efforts to allow students to refinance their loans at lower rates:

It's good to remember, as we discuss these plans, that people with college degrees are the best-off people in the U.S. They are a cognitive elite with substantially more earning power than almost anyone else....It's hard to see why we would take money from other people and give it to this group.

At this point, someone in the audience is mentally complaining that I don't understand the impact student loans have on family formation . . . buying a house . . . saving for retirement. But au contraire: I understand all too well....However. Some perspective is useful.

This graphic comes from a 2012 Federal Reserve report. While you may have heard the horrifying statistics about how the average borrower has almost $30,000 in student loan debt, the median borrower has more like $12,000. That number gets dragged upward by a small number of students with huge loans — many of them professional school graduates like me. The overwhelming majority of borrowers have less than $25,000 in debt, which is to say something more like a car loan than a mortgage. Yet we do not argue that we need to reduce the cost of car loans lest the Toyota Camry should keep yet another generation of Americans from the precious boon of homeownership.

Surprisingly, I partly agree. College grads are indeed the best paid workers in America, and spending ever more tax money on student loans seems a bit too much like taking from the poor and giving to the rich for comfort. What's more, I'm not convinced that ever more generous student loan programs do any good. I suspect that, in practice, they merely allow universities to raise their tuition fees even more than they otherwise would.

And yet....unlike McArdle, I'm persuaded by the aggregate numbers that we have a genuine problem here. We don't have a problem with college grads buying ever more expensive cars, which is why no one wants to provide auto loan relief. We do have a problem with the cost of college skyrocketing. The resultingly high aggregate student loan debt is having a noticeable adverse macroeconomic impact (family formation, buying a house, etc.) at a time when we can ill afford it, which makes the case for a temporary refinancing program fairly compelling. More generally, it's also the case that no society is well served by making income a barrier to higher education. More and more, however, that's what we're doing.

But what's the answer? Personally, I'd prefer to see this problem addressed at the source: the spiraling cost of a university education, especially public university education. Unlike Harvard grads, most public university grads aren't going to land lucrative jobs after graduation. They'll be teachers and accountants and civil engineers. We want everyone who's capable of doing one of these jobs to get a university education, and to get it without having to worry about whether they can afford it.

But that ship has sailed. Unlike the era in which I graduated, public universities are expensive these days, and that's not likely to change. One answer might be to target public assistance more sharply on public schools. Basically, I'd like to see anyone who qualifies be able to attend a public university for only a nominal fee. Does that mean less money for assistance to Harvard students? Yes, but I'm not sure that would really be such a tragedy. Some students would get assistance elsewhere, while others would simply have to settle for UCLA or Ohio State. In the real world, however, I'll bet that only a minuscule fraction of students would truly lose much by having to go to UCLA instead of Harvard—or by having to accept that Harvard will put them into debt. The cost wouldn't be zero, perhaps, but probably pretty small.

In any case, the rising cost of college is a real problem. One way or another, I think we'd all benefit as a country by doing something about it. Whether that's a reduction in loan costs, or a reduction in public university fees, is something we can argue about. But we ought to do something.

Abbreviated pundit roundup: Voting rights, <b>student loan</b> reform and <b>...</b>

Posted: 10 Jun 2014 04:41 AM PDT

The New York Times breaks down continued degradation of voting rights in Ohio:

Someday, after they figure out how to appeal to a broader swath of the electorate, Republicans will probably be embarrassed by how much time they have spent making it harder for Americans to vote. For now, though, the beat just goes on. In a misguided effort to hold on to power despite an ever-shrinking base of older white voters, Republican lawmakers around the country continue to impose all sorts of barriers to the ballot box.

One of the most egregious examples is happening in Ohio, a critical swing state in presidential elections and the scene of many recent disenfranchisement attempts.

In February, state legislators quickly pushed through a law removing the first week of Ohio's 35-day early-voting period — which was also the only week that permitted same-day registration. Days later, Ohio's secretary of state, Jon Husted, issued a directive further cutting back on early voting by eliminating voting during evening hours, on Sundays, and on the Monday before Election Day. Previously, county election boards had the power to set polling hours based on local needs, which vary widely — one rural county has just 13,000 residents, while more than 1.2 million live in Cuyahoga County, which includes Cleveland.

Robert Reich at The Christian Science Monitor:

Mississippi used its new voter-identification law for the first time Tuesday — requiring voters to show a driver's license or other government-issued photo ID at the polls.

The official reason given for the new law is alleged voter fraud, although the state hasn't been able to provide any evidence that voter fraud is a problem.

The real reason for the law is to suppress the votes of the poor, especially African-Americans, some of whom won't be able to afford the cost of a photo ID.

More on the day's top stories below the fold.

Stephanie Woodward at In These Times takes an in-depth look at the Native American vote:

Though measures that curtail minorities' voting rights, such as stringent ID requirements and limited voting time, have made headlines in recent years, the challenges Native Americans face when they go to the polls have never been on the national radar. In the second decade of the 21st century, nearly 50 years after the Voting Rights Act of 1965 outlawed discriminatory voting practices, American Indians are still working to obtain equal voting rights.

David Firestone looks at the quid-pro-quo controversy in Virginia:

Republicans "will do anything and everything to prevent low-income Virginians from getting health care," Scott Surovell, a Democrat in the House of Delegates, told The Post. "They figure the only way they could win was to give a job to a state senator."

In various forms, this kind of smashmouth politics is played in statehouses across the country by lawmakers who know that most voters don't care or aren't paying any attention. It gives the lie to the idea, usually promoted by Republicans, that state legislatures are a great laboratory for government innovation. They may be a lab, but only sunlight and voter anger can cure what is growing there.

The Army Times says that the president was right in rescuing Bowe Bergdahl:

What cannot be a matter of debate, however, is the Army's — and America's — promise to leave no warrior behind.

There are some who suggest that Bergdahl should have been left behind, heedless of the reality that the facts of the case are far from settled and he hasn't yet had a chance to defend himself.

That's not America. We must always bring our sons and daughters home — just as we must always ensure justice is served.

Tom Keane at The Boston Globe examines how lottery systems bank on the poor:

Data collected by Globe reporter Catherine Cloutier show the Lottery is often a Robin Hood in reverse, taking from the poor and giving to the rich. Chelsea, for instance, is one of the state's worse-off cities, with a poverty rate of 25 percent. Its residents spend an average $1,178 a year on lottery tickets. Meanwhile, those in ultra-wealthy Weston spend a scant $45 a year. [...]

Lotteries prey on the gullible, desperate, and poor, amounting in essence to a highly regressive tax. True, unlike with taxes, no one is compelled to purchase a lottery ticket. But the distinction is hollow. For all intents and purposes, lotteries are used for the same purposes as taxes.

Julia Grant, writing at The Detroit Free Press, writes about the value of college and student loan reform:

It is ironic that amid the complaints about the uselessness of college, organizations such as the Michigan College Access Network are avidly working to get more students to apply to college, including those who are least likely to enroll. We need more, not fewer, college graduates. The U.S. has fallen from its place as the country with the most college graduates — a status it held as recently as 1990 — to No. 12, a situation that is certainly not enhancing our economic competitiveness.

Rising student debt and tuition make many leery about the value of the degree. In 2010, President Barack Obama set into place a plan that would allow students to use only 10% of their income to repay student loans. On Monday, Obama rolled out a new plan that would extend this benefit to a broader range of students, including those who received loans before 2007 and or stopped borrowing by October 2011. In addition, Sen. Elizabeth Warren has proposed legislation that would permit about 25 million Americans to refinance their loans at lower rates, significantly decreasing the debt burden.

Lessening the student debt load is absolutely essential if we are to foster college attendance. Further expansions of Pell Grants and tying them to the cost of living should also be on our agenda in order to give the phrase "equal opportunity" real meaning.

The Los Angeles Times likes both proposals, but urges adopting a different funding mechanism for Warren's bill to ease its way through Congress:

Both measures are positive, justified steps to ease the financial pinch from student loans. It's a significant issue, propelled by three decades of stagnant family incomes while average tuition at a four-year public university tripled (problems that, unfortunately, neither of these measures address). Warren wants to implement the so-called Buffett Rule, raising taxes on people earning more than $1 million a year. Whatever the merits of such a rule, it is likely to be a deal-killer in the Senate, where Republicans would be sure to filibuster it, and certain to go down in the House, where Republicans hold a majority and are committed to opposing new taxes.

What that means is that right now, at least, Warren's bill won't graduate. Warren should work with her colleagues to find another funding mechanism they can support, and enact this bit of relief.

Chris Weigant at The Huffington Post looks at the strengths of Senator Elizabeth Warren's student loan proposal and urges the president to take the next step:

[W]hile it is nice to see President Obama doing what he can, on his own, to tweak a few rules on student loans, it really doesn't go far enough. Wholeheartedly getting behind Senator Warren's idea to charge students the same rate as we charge banks would signal a much more fundamental reform of the entire student loan system. It would make it easier for students to repay their loans, and by doing so it would allow them to spend more of their earnings on goods and services, which would help boost the economy. These students are the brightest America has to offer, and making it easier for them to gain a higher education will help guarantee a well-educated workforce for the future. Making student loans more affordable means making college more affordable for all but the wealthiest families. President Obama should champion Warren's plan to make a much more significant reform to the way America's students pay for their education. After all, if America can afford to loan banks money at such a low interest rate, then we should also be able to afford to offer the same rate to students.
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