Student loan | The <b>Student Loan</b> Problem No One Is Talking About: Grad School <b>...</b> |
- The <b>Student Loan</b> Problem No One Is Talking About: Grad School <b>...</b>
- “@ Hillary Clinton: How does your <b>student loan</b> debt make you feel <b>...</b>
- Helping Millennial Entrepreneurs Conquer <b>Student</b>-<b>Loan</b> Debt <b>...</b>
- Problem with government offer to forgive <b>student</b>-<b>loan</b> debt <b>...</b>
- Debt-Locked: <b>Student Loans</b> Force Millennials to Delay Life <b>...</b>
| The <b>Student Loan</b> Problem No One Is Talking About: Grad School <b>...</b> Posted: 10 Aug 2015 09:01 PM PDT Student loan debt isn't a problem. Having a lot of student loan debt is the problem. That sounds obvious, but it's a point that's lost in a lot of discussion involving large numbers like the $1.2 trillion bill being carried around by America's former students. Look behind the numbers, and you'll see that the student loan debt problem – just like the credit card debt problem, or the mortgage debt problem – is multi-faceted. Some people are managing their debt just fine, some aren't. For example, despite many claims that student loans are blocking millennials from buying homes, a study by Goldman Sachs last year argued that millennials with average college debt (around $30,000, depending on how you count) are no less likely to get a mortgage than their loan-free peers. That makes sense. Paying down a $30,000 student loan isn't much different from paying off a car loan. On the other hand, former students with more than $50,000 in debt are considerably less likely to own a home, and those with large debt that eats up a big chunk of their income are much worse off – those who spend more than 10% of their income are 22% less likely to own a home. So the problem isn't debt, it's unmanageable debt. And not all college debt is created equal. For example, The New York Times recently reported that only 12% of students who graduated from public colleges owed more than $40,000, while 20% of private college graduates did. On the other hand, fully 48% of for-profit college graduates owed more $40,000. But to find the really stunning student debt numbers – and the heart of the problem — you need to look at students who go on to graduate school.  Check Credit Before Consolidating Student DebtGet your FREE Credit Score & personalized Action Plan. See where you stand & learn ways to better manage your score before consolidating your student loans. FREE and updated every 30 days.Get Started Now » Median combined college / graduate school debt for someone who earned a degree in 2012 was $57,600 and worse, one-quarter of all grad degree earners had borrowed more than $100,000, according to a paper published last year by the New America Education Policy Program. One in 10 borrowed more than $150,000. It should come as no surprise that people carrying six-figure student debt balances aren't taking out mortgages. They are already making what feels like a mortgage payment every month. Roughly 40% of the $1 trillion-plus outstanding student debt is owned by graduate school students, the paper says Jason Delisle, who wrote the New America paper, blames skyrocketing graduate school debt on changes to federal loan programs that essentially allow grad students unlimited borrowing. The more students can borrow, the more schools can charge. Recent research linking increased lending limits to tuition inflation suggest he's right. "Looking at the debt levels of law school students, for example, there was no significant change in the average amount of debt students graduated with between 2004 ($88,634) and 2008 ($90,052). But by 2012 (after loan limits were raised), the average spiked to $140,616, and the average monthly payment shot up from $760 in 2008 to $1,187 in 2012," he writes. In other words, when talking about the $1.2 trillion student loan problem, it might be more specific to talk about the graduate school student loan problem. And it might be possible to focus the discussion even more. A new study released in July from the Center for American Progress (CAP) found that 20 universities received one-fifth of the total amount of loans the government gave graduate students in the 2013-2014 academic year. Those schools educate only 12% of the students, however — and most of them are private, for-profit schools. So we might think of the student loan problem as the graduate school and for-profit school problem. Delisle says that's not quite accurate, however. "For-profits are a small share of the problem," he said. His data shows that for-profit schools generate only 10% of the total debt for students who end up owing more than $100,000. For grad students borrowing between $25,000 and $50,000, that number swells to 16% — disproportionate, since that accounts for only 8% of students, but still a small slice of a big problem, he said. Check Credit Before Paying Down Student LoansGet your free Credit Score & personalized Action Plan. See where you stand & learn ways to better manage your score before paying down your student loans. Free and updated every 30 days.Get Started Now » "Graduate school debt is driving the big numbers," he wrote in a post on Forbes.com recently. "Even if lawmakers expunge the system of unscrupulous for-profit colleges, those trends won't change." The danger of graduate school debt comes into focus even more sharply when you consider the surge in graduate school applications that occurred during the Great Recession, when many suddenly unemployed mid-career professionals jumped into graduate schools for a lifeline. Their loans are just starting to come due now. Of course, big graduate school balances aren't the only serious problem in the student debt world. College students who drop out face perhaps the biggest obstacles of all – no degree and years of monthly repayments. College graduates with higher-than-average loan balances also face a steep climb. But when you hear horror stories about overwhelming student loan balances, odds are, you are hearing about a former graduate school student. If you're having trouble paying your student loans, it's important to contact the loan servicer to see if you qualify for a relief program (here's a list of repayment options), or if you can restructure your loans for a more manageable payment. Missing payments, not to mention defaulting, can have a big negative impact on your credit. If you want to see how your student loans are affecting your credit, you can get a free credit report summary, updated every month, on Credit.com. More on Student Loans:
Image: iStock Sign up for our weekly newsletter.Get the latest tips & advice from our team of 50+ credit & money experts, delivered to you via email each week. Sign up now. Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter. More by Bob Sullivan  |
| “@ Hillary Clinton: How does your <b>student loan</b> debt make you feel <b>...</b> Posted: 14 Aug 2015 08:55 AM PDT By Nathan Tankus, a writer from New York City. Follow him on Twitter at @NathanTankus
The above tweet is real and is from Hillary Clinton's official twitter account. It is very difficult to express how appalling this sentiment is. It represents much of whats wrong with American politics in our current moment. It is a) an infantilization of your audience. Presumably college students are capable of forming words, let alone sentences, explaining their feelings. b) asking about students feelings towards their student debt. What does this matter? Is policy based around people's feelings? If people felt good about their student debt would it not be a policy problem? Feeling can be altered by drugs and other stimulants of all kinds. The obsession with subjective mental states in public policy is pernicious c) What matters concretely is who is getting blocked from obtaining an education because student loans are used to finance education and the depressive economic effects (as well as social effects) of a large load of student debts nonadjustable by bankruptcy.
Of course the request for people's "feelings" through "emojis" wasn't about getting genuine feedback-obviously. It was about clumsily attempting to manipulate people's feelings by presenting Clinton's "New College Compact" as something to make students feel better. The "content" of her proposals are similar. The overarching theme is expressed in this quote she (or her staff) offers to finish a sketchy overview of her proposals: I want every young person in America to have their shot at that moment. I want every hard-working parent out there to get the chance to see his or her child cross a stage — or to cross it themselves. America should be a place where those achievements are possible for anyone who's willing to work hard to do their part. In other words, what matters is the emotions you or your children feel being educated, not concretely what they do for you. Notice that she says ". America should be a place where those achievements are possible" not that everyone should be guaranteed an education. In our current neoliberal order i guess it is hopelessly idealistic to think everyone should have a good education, it shouldn't merely be "possible". What of her concrete proposals? they are is milquetoast as this ending summary implies. For existing student debt she thinks that the existing loans should be refinanced at current rates. In the future she says that the government shouldn't profit off of student loans.At first glance this is very appealing,but what does this mean in practical terms? In practice it means tying the interest rate on student loans to the interest rate on government bonds. Since this rises and falls with federal reserve policy, such a policy would directly vary the affordability of college based on fed decisions. This is lunacy from a public policy perspective. A major federal initiative that is profoundly changed by what unelected supposedly independent bureaucrats do is at best a bad one. Why should interest be charged on student loans at all? For those students struggling to pay student loans at all Hillary will enact a borrower "bill of rights". As part of this bill of rights students will be able to enroll in "income-based" repayment options and borrowers in default will be given new "rehabilitation" and "repayment" options. This is needlessly complex and idiotic. We already have a much simpler, well established process- it is called bankruptcy. This area is one where form ("she's giving us a bill of rights!") dominates over content. Another major element of her proposal is "risk sharing with colleges". The idea is that since colleges don't lose money when students don't finish a degree or default on their student loans they have an incentive to pump out "worthless" degrees. This would put "skin in the game" for colleges. At first glance this is appealing but on closer inspection it falls apart. First education is a "positional" good meaning schools compete much more on reputation and exclusivity than price. This means schools that experience higher than average default or dropout rates would likely pass them on to current students rather than have it eat into their "profit margin". after all most colleges are at least legally non profit. Second default rates and dropout rates aren't primarily under a school's control. This has mostly to do with people's ability to get a job or ability to support themselves during school. A society with much lower unemployment or even a job guarantee would experience much lower default rates and dropout rates and we couldn't credit the schools for that either. Punishing or rewarding schools because you have failed/succeeded to implement adequately stimulative macroeconomic policy is terrible policy. Third this pushed schools to accelerate the process of shrinking majors seen as "unprofitable" and forever expand STEM majors. It is the essence of neoliberal education policy to see education as a process by which people accumulate "human capital". There are broader social benefits (positive externalaties if you will) to an educated citizenry that goes beyond human beings use to an employer. Directing our education policies with that in mind is awful policy. During times of high employment employers suddenly find uses for these previously "unemployable" liberal arts majors. To the extent that certain degrees are unemployable it is because f the arbitrary pickyness of employers, not the training they have received. Why not be picky if you can afford to be? Focusing on form over content reaches its zenith towards the end of this overview of her "plan": We're going to work closely with Historically Black Colleges and Universities and Hispanic-Serving Institutions, because they serve some of America's brightest students, who need the most support and too often have gotten the least of it This is plainly offensive to students of color attempting to affect societal change around racial inequality. In policy terms it is a drop in the bucket but politically it is an attempt to appeal to white liberal guilt and offer symbolic- but not real- change to placate activists. It is also so overbearing and clumsy. It is hard to imagine someone outside of a very tight-knit, claustrophobic set of institutions and social circles that wouldn't be embarrassed by such a heavy handed attempt to get support on the cheap. This isn't an overview of all of her proposals but I think it covers the most important and salient ones. Overall HIllary's numerous proposals either pick at the edges of higher education policy or are actively wrongheaded. What's striking about these proposals isn't the fact that they are center right at best- it is that they are center right in a democratic party primary. Presumably in the general election and certainly as president Hillary Clinton would run to the right of such proposals as is cynically expected in American politics. It is amazing to see Clinton already tell the Democratic Party base "nothing will change" on an issue which has gotten such grass roots traction in recent years. As Yves said, let them eat emojis.  . |
| Helping Millennial Entrepreneurs Conquer <b>Student</b>-<b>Loan</b> Debt <b>...</b> Posted: 12 Aug 2015 12:05 PM PDT  SoFi CFO Nino Fanlo, left, and CEO & co-founder Mike Cagney. Elena Graham / SoFi "Student loan debt shouldn't stop entrepreneurs from developing and raising capital for their companies," said Mike Cagney, CEO of SoFi, which was a 2015 CNBC Disruptor company. "Our Entrepreneur Program differs from traditional incubators by not only sourcing capital but also providing resources like business development support, valuable mentoring and networking opportunities — all without founders sacrificing equity.""Starting your own thing with no income and no certainty of when you're going to get an income when you have a mountain of student debt is a really scary thing." Currently interviewing for its fourth class, the program is open only to SoFi borrowers and offers loan deferment, access to investors, peer networking and mentorship from top executives on how to build a business. To be eligible, applicants must be a founder or co-founder building a scalable, innovation-based business full-time. Loan deferment was key, Hodges said. "Starting your own thing with no income and no certainty of when you're going to get an income when you have a mountain of student debt is a really scary thing," he said. "And I think it greatly deters a lot of people. It definitely kept me up at night. I had a negative net worth for most of my early days when building the company." Elena Lucas, a SoFi borrower, applied to the program in 2014. At the time, she was shouldering about $120,000 in student debt. Lucas says SoFi's strong investor network was key in helping her and co-founder Daniel Roesler successfully launch UtilityAPI, an enterprise software company that delivers simple access to energy-usage data. "A good chunk of my angel investing came from the SoFi network," she said, adding, "The equivalent of what I refinanced with SoFi is what I got from my angel investors through SoFi connections. "Providing resources should be the goal of every student loan company. It just boggles my mind that they just don't have these types of resources for their borrowers. They should want their borrowers to get good-paying jobs." 4 marketing mistakes start-ups can't afford to makeJennifer Beall, founder of L.A.-based Tot Squad, applied and was accepted to the Entrepreneurship Program in May 2013. Her company, originally named CleanBeeBaby, started out as a service to clean car seats for busy parents and had been in operation for three years, but she wanted to expand.At SoFi's "pitch day," the Northwestern University's Kellogg School of Management graduate pitched her idea to SoFi's investors. "It's really a warm crowd of investors, because if our businesses fail, we can't pay back our loans, so they are almost a little bit already invested in our success," Beall said, adding, "I raised $500K — about half via contacts made through SoFi." With the backing, Tot Squad redefined its service to not only clean but repair car seats and strollers, at shopping centers and baby boutiques for $20 to $40 a pop in both New York and L.A. Beall has seen revenue double each year to just under $1 million, and in February the company began franchising. Beall's advice to aspiring entrepreneurs: "Don't be afraid if you're not the next Mark Zuckerberg," she said. "Start little. Even if your product isn't perfect — even if you only have one feature of the 10 features you want to have — go and test it and see if customers are willing to pay for it. Just getting that little bit of traction will help you figure out how to make it work. And if you're afraid, franchising is a great alternative. The business plan is already written and proven. Buy a franchise and you can be an entrepreneur. It's a tried-and-true way to make money." |
| Problem with government offer to forgive <b>student</b>-<b>loan</b> debt <b>...</b> Posted: 11 Aug 2015 05:30 AM PDT
The latest Federal Reserve data shows there is nearly $1.3 trillion in outstanding student-loan debt in the US. In late 2009 and early 2010, student-loan debt passed auto loans, credit cards, and home-equity lines of credit as the biggest debt burden Americans face. According to Debt.org, "The latest studies say that 70% of college graduates leave school with student-loan debt that in 2014 averaged $33,000." Realizing graduates were struggling to repay their heavy debt burdens, the government announced a few plans that would allow student debt to be forgiven over time. The loan-forgiveness repayment plans are helpful, but it's not that simple.Two of the more popular ones are Public Service Loan Forgiveness and Income-Based Repayment. Public Service Loan Forgiveness allows those working in the public sector to apply to have their loans forgiven after 10 years of service, which equates to 120 payments. For those who don't work in the public sector, the government created a few income-driven plans. These allow borrowers to pay 10% to 20% of their discretionary income toward their student loans, which will then be forgiven in 20 to 25 years. But there is one big problem. The loan balance at the time of forgiveness for income-driven plans is treated as income and taxed as such. Depending on the interest rate of the loan (some Federal loans have interest of more than 7%), the income-based payments might not cover the interest that is accumulating on the debt, which would cause the payoff amount of the loan to balloon over those 25 years. Also, if someone is making income-based payments, chances are they are doing so because they cannot afford to make their regular loan payments. If that's the case, what makes the government think borrowers will be able to foot the massive tax bill at the end of 20 or 25 years? The government has a handy loan-repayment calculator that lets borrowers see what their payments will look like under different repayment programs. We made a hypothetical situation in which a new borrower took out $100,000 in direct subsidized loans at a conservative 4% annual interest rate, has an annual income of $45,000, is single, lives in New York, and has no children. Under a standard repayment plan, our hypothetical borrower would have monthly payments of $1,012 for 10 years. Under the Income-Based Repayment program for new borrowers, our recent graduate would have much lower monthly payments over 20 years, ranging from about $228 to $719, as her income increases over time: Should a needy person be expected to pay a $19,000 tax bill?That IBR program has a couple of big downsides. First, our borrower would be paying far more interest than the person would with a standard plan — $76,563 under the income-based plan versus $21,494 with the standard plan. Second, under the income-based plan, our borrower would have a balance of $72,050 left after 20 years. The government would then forgive that balance, but it would count as taxable income in that year. Assuming 2014 tax brackets and rates, along with the initial $45,000 income, this would the person's tax bill in that year by almost $19,000. Yes, the overall amount owed is lower. But someone who is barely able to make ends meet is unlikely to be able to save another $19,000 to pay the tax bill that comes with the loan forgiveness. One of the authors of this post has student debt and a firsthand account of the problem. He has made several phone calls and sent numerous emails to President Obama, presidential candidates, members of the US Senate Committee on Health, Education, Labor, and Pensions, and his representatives in Congress but has never received anything other than the standard reply. If the government really wants to address the student-loan problem, it should look at this conservative example and realize there are a lot of people who may end up worse off. |
| Debt-Locked: <b>Student Loans</b> Force Millennials to Delay Life <b>...</b> Posted: 05 Aug 2015 11:14 AM PDT Student loan debt can cost you more than principal and interest. It can mean postponing major milestones of adulthood. A survey by Bankrate.com released Wednesday found that 56 percent of people aged 18 to 29 have put off major life events like getting married, purchasing a car or home, or saving for retirement, because of student debt. Older people were not immune to the ills of student debt either. Forty-five percent of those 30 and older said educational loans hampered their financial life, according to the survey of 1,000 people in July. "Student debt is a drag on the economy," said Steve Pounds, a Bankrate financial analyst. "If people aren't buying homes, aren't buying cars and aren't saving for retirement, it's going to have a detrimental effect." Despite the high levels of student debt, Americans are becoming more optimistic about the value of a college education, according to a separate survey. Fifty-two percent of respondents said a college education is a good financial investment, according to Country Financial Group's latest financial security index, up from 48 percent in 2014. It's the first time in seven years that the percentage of people who thought a college education was a good investment has increased. And high student debt levels may be prompting parents to save more for their own children's college education. Student Loan Repayment Scams: How to Avoid Being Ripped Off One-third of parents still have student debt of their own, according to a recent survey by the College Savings Foundation, but 51 percent of parents said saving is their top strategy for funding their children's college costs. That's up from 45 percent in last year's survey. Of the 800 parents surveyed by the foundation, one-third had a 529 college savings plan, which gives users a tax-advantaged way to invest and pay for college costs. Yet millennials face the biggest hurdles to reach the same financial turning points previous generations reached in their younger years because of student debt. Credit bureau Experian finds that millennials have the lowest credit scores of any generation - an average of 625 compared to 650 for members of Gen X and a national average of 667. They also carry as much nonmortgage debt as Gen Xers, but have lower income on average. Better budgeting can help any generation manage their debt and reach their goals, financial planners say. Student Loan Debt: What You Need to Know About the Societal, Economic Costs Paying off student loans shouldn't be the sole financial focus of millennials, said Tom White, founder and CEO of iQuantifi, an online financial planner. "Millennials can pay down their debt, save for a home and retirement at the same time. It's about looking at their financial situation holistically," he said. Even small amounts invested in retirement plans by people in their 20s can produce big results thanks to the power of compounding, said John Bucsek, a certified financial planner and managing partner of MetLife Solutions Group. He recommends millennials contribute to employer-sponsored retirement plans at least up to the employer match. Millennials can also save for retirement and for a home by investing in a Roth IRA, which allows first-time homeowners to withdraw $10,000 plus their original Roth contributions to buy a home (within a restricted time period), Bucsek said. Student loan debt is a drag, but it doesn't have to be an anchor. |
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Recent governmental analysis has shown that about one-fourth of all federal financial aid is directed toward students who attend private, for-profit colleges, even though these students represent just 12 percent of the national college population. Private Student loan education are non-federal loans - student loans issued by banks and private lenders, rather than by the federal government. Private student loans are credit-based loans carrying variable interest rates that can be as much as three to five times as high as the fixed interest rates on federal college loans.
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