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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Saturday, 7 June 2014

Student loan | Obama focuses on actions to ease student loan debt in weekly ...

Student loan | Obama focuses on actions to ease <b>student loan</b> debt in weekly <b>...</b>

Obama focuses on actions to ease <b>student loan</b> debt in weekly <b>...</b>

Posted: 07 Jun 2014 07:00 AM PDT

... at a time when college has never been more important, it's also never been more expensive.

President Obama has a hit a theme in his most recent weekly addresses: Here's a problem, here's an executive branch solution I'm implementing, but we still need the help of an obstructionist Congress to provide a more comprehensive solution, and please, Americans, contact your representatives to get them moving on this even as I keep working on it.

This morning's weekly address applied this formula to higher education and student loan debt.

The problem:

The average undergraduate student who borrows for college now graduates owing almost $30,000. And I've heard from too many young people who are frustrated that they've done everything they were supposed to do – and now they're paying the price.

The actions he's taken as president:

I've taken action on my own to offer millions of students the opportunity to cap their monthly student loan payments to 10% of their income.

But there's that damn obstructionist party in Congress:

But Congress needs to do its part. The good news is that Senate Democrats are working on a bill that would help more young people save money. Just like you can refinance your mortgage at a lower interest rate, this bill would let you refinance your student loans. And we'd pay for it by closing loopholes that allow some millionaires to pay a lower tax rate than the middle class.

And the implied action ask, with his own vow to continue to work on the issue:

That's the choice that your representatives in Congress will make in the coming weeks – protect young people from crushing debt, or protect tax breaks for millionaires. And while Congress decides what it's going to do, I will keep doing whatever I can without Congress to help responsible young people pay off their loans – including new action I will take this week.

To read the transcript in full, check below the fold or visit the White House website.

Remarks of President Barack Obama
Weekly Address
The White House
June 7, 2014

Hi, everybody. This is commencement season, a time for graduates and their families to celebrate one of the greatest achievements of a young person's life. But for many graduates, it also means feeling trapped by a whole lot of student loan debt.  And we've got to do more to lift that burden.

See, in a 21st century economy, the surest pathway into the middle class is some form of higher education. The unemployment rate for workers with a bachelor's degree is just 3.3 percent – about half what it is for high school graduates. The typical graduate of a four-year college earns $15,000 more per year than someone with just a high school degree.  

But at a time when college has never been more important, it's also never been more expensive.

That's why, since I took office, I've worked to make college more affordable. We reformed a student loan system that gave away billions of taxpayer dollars to big banks and invested that money where it makes a bigger bang – in helping more young people afford a higher education.

But over the past three decades, the average tuition at a public four-year college has more than tripled. The average undergraduate student who borrows for college now graduates owing almost $30,000. And I've heard from too many young people who are frustrated that they've done everything they were supposed to do – and now they're paying the price.

I've taken action on my own to offer millions of students the opportunity to cap their monthly student loan payments to 10% of their income. But Congress needs to do its part. The good news is that Senate Democrats are working on a bill that would help more young people save money. Just like you can refinance your mortgage at a lower interest rate, this bill would let you refinance your student loans. And we'd pay for it by closing loopholes that allow some millionaires to pay a lower tax rate than the middle class.

That's the choice that your representatives in Congress will make in the coming weeks – protect young people from crushing debt, or protect tax breaks for millionaires. And while Congress decides what it's going to do, I will keep doing whatever I can without Congress to help responsible young people pay off their loans – including new action I will take this week.

This country has always made a commitment to put a good education within the reach of all who are willing to work for it. That's what made us an economic superpower. That's what makes us special. And as long as I hold this office, I'll keep fighting to give more young people the chance to earn their own piece of the American Dream. Thanks, and have a great weekend.

#

Obama Has Typical Solution For <b>Student Loans</b> | Right Wing News

Posted: 07 Jun 2014 05:11 AM PDT


Written By : William Teach
June 7, 2014

Another week, another Obama avoidance of the VA scandal. He has yet to truly address it during a Weekly Address, despite the terrible care so many veterans are receiving. This week, he decides he wants to patronize students who took out loans that left them with crushing debt. At least he wasn't chewing gum (video here)

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(White House) Hi, everybody. This is commencement season, a time for graduates and their families to celebrate one of the greatest achievements of a young person's life. But for many graduates, it also means feeling trapped by a whole lot of student loan debt. And we've got to do more to lift that burden.

See, in a 21st century economy, the surest pathway into the middle class is some form of higher education. The unemployment rate for workers with a bachelor's degree is just 3.3 percent – about half what it is for high school graduates. The typical graduate of a four-year college earns $15,000 more per year than someone with just a high school degree.

But at a time when college has never been more important, it's also never been more expensive.

The funny part is that Obama and Democrats have been pushing hard for snowflakes to take on this same student debt. Interestingly, telling everyone that they need a college education also disses a nice chunk of his base who are blue collar union members. Yes, a college education is important, but the degree matters. Many are getting pretty much worthless degrees in some type of "studies" disciple, the equivalent of the old joke about basket weaving. But, at least basket weaving is a skill that can bring money in.

But over the past three decades, the average tuition at a public four-year college has more than tripled. The average undergraduate student who borrows for college now graduates owing almost $30,000. And I've heard from too many young people who are frustrated that they've done everything they were supposed to do – and now they're paying the price.

Good thing Obamacare streamlined student loans, in which the "Congress (Democrats only, let's not forget) removed the private sector from the student loan process, to eliminate federal payments to banks and to move the revenue from the lending process into federal coffers." The profits are meant to go to help pay for Obamacare. So, Obama and the Dems have a vested interest in making sure lots of snowflakes take out student loans.

I've taken action on my own to offer millions of students the opportunity to cap their monthly student loan payments to 10% of their income. But Congress needs to do its part. The good news is that Senate Democrats are working on a bill that would help more young people save money. Just like you can refinance your mortgage at a lower interest rate, this bill would let you refinance your student loans. And we'd pay for it by closing loopholes that allow some millionaires to pay a lower tax rate than the middle class.

And there we go: he's gone to the same old tax the rich well. I'd note that he's officially out of ideas, but that occurred long ago. Of course, if he was truly serious, he'd stop taking all the deductions on his own taxes and pay the full rate.

Crossed at Pirate's Cove. Follow me on Twitter @WilliamTeach.

Vets&#39; advocates push for more <b>student loan</b> protections - Military Times

Posted: 04 Jun 2014 02:43 PM PDT

For many veterans attending college, student debt ultimately will become "one of the largest inhibiting factors" to their long-term career success, a veterans' advocate told Senate lawmakers Wednesday.

Veterans report difficulty in finding accurate information and also encounter "unnecessary roadblocks" created by loan companies, William Hubbard, a spokesman for Student Veterans of America, told the Senate Finance Committee's fiscal responsibility and economic growth panel.

A Consumer Financial Protection Bureau report in April found that the top five complaints about student loans, collected from more than 1,300 individuals carrying debt, were all related to miscommunication.

The confusion and lack of transparency around loans is a major issue, said Nancy Hoover, director of financial aid at Denison University in Ohio, who works with students to help them understand and eventually repay student loans.

"Keep it simple," Hoover said, recommending making loan service providers virtually invisible to borrowers so there is only one point of contact for all information around a student's loans. For federally-backed loans, that would be the Education Department.

If these changes were made, "a lot of this confusion would be eliminated," Hoover said.

In 2012, former Defense Secretary Leon Panetta told reporters that 41 percent of service members were dealing with student loan debt.

Among them is Rachel Engler, 33, a nurse anesthetist in Northern Virginia who has been in the Navy for nine years, including tours in Afghanistan.

"Figuring out how to pay for school was really confusing," Ensler said. "The stress from the finances was, and still is, a lot."

To pay for a graduate degree in nurse anesthesia at Northeastern University in Boston, Ensler borrowed $60,000 in federal loans.

"You're taking a financial setback for years in order to continue your education," she said.

Hubbard, who joined the Marine Corps at 17 and is still in Marine Corps Reserve, said veterans may have student debt outstanding from schooling before service, poor access to information while on active duty, and a limited understanding of the student loan landscape.

His group, the nonprofit Student Veterans of America, has a number of chapters at colleges and universities throughout country that support student vets on a variety of issues.

Misinformation can lead to veterans getting taken advantage of by loan providers. Hubbard noted a recent case in which private loan provider Sallie Mae paid a $60 million dollar settlement for abusive practices related to student loan products.

The infractions, brought to light by a member of the military community, "made me sick," said Hubbard.

"As they should," responded Sen. Elizabeth Warren, D-Mass., a subcommittee member who has sponsored legislation to refinance student loans at lower interest rates.

"Federal contracts should involve accountability and oversight protections that require servicers to perform to a high standard," Warren said.

Sen. Sherrod Brown, D-Ohio, expressed frustration with overly complex loan repayment options that can confuse student veterans. Many of those options, he said, appear "better suited for a contract lawyer than recent graduates. It's unrealistic at best and cynical at worst."

Brown is supporting a Student Loan Borrower Bill of Rights, legislation that would provide clearer communication around student loans and offer more flexible repayment options.

Such protections are essential, said Hubbard, if there is an expectation for veterans to stay out of debt, buy homes, start businesses and ultimately invest in the U.S. economy.

"The investment America has made in the GI Bill and its veterans becomes an even clearer asset to our economy when those veterans are powered with the right tools," said Hubbard. "By reducing the debt burden on service members and veterans, we can set our veterans up for long-term success."
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Friday, 6 June 2014

Student loan | Another Reason To Rein In Big Banks: Student Loan Shenanigans

Student loan | Another Reason To Rein In Big Banks: <b>Student Loan</b> Shenanigans

Another Reason To Rein In Big Banks: <b>Student Loan</b> Shenanigans

Posted: 05 Jun 2014 11:05 AM PDT

High interest rates and more than $1.2 trillion of student loan debt are not the only challenges facing the 40 million Americans with student loans. Student borrowers face intense hardships caused by the deceptive practices of loan providers and servicers, and those problems came under the scrutiny Wednesday of the Senate Banking Subcommittee on Financial Institutions and Consumer Protections.

Currently, student borrowers are automatically assigned to one of more than 50 loan providers or servicers, including JPMorgan Chase, Wells Fargo, and Citibank. Because the federal contracts with these providers are up for renewal this summer, the Senate is investigating the scope and implications of the more than 2,300 complaints of loan providers and servicers compiled by the Consumer Financial Protection Bureau (CFPB). The grievances include crucial information not being available, changes in loan terms without consent and without apparent reason, and blatant lying by loan providers and servicers.

In his opening statements, Sen. Sherrod Brown (D-Ohio) said he was concerned that "student loan servicers care more about maximizing profits than customer service."

These companies' actions prove his point.

Robert Geremia, a teacher at Woodrow Wilson High School in Washington, D.C., still has outstanding student loans several years out of college. He said that he never received enough information about the long-term consequences of his loan before he signed for it. Because of this, he will pay over $10,000 in interest and fees.

There are no industry standards that dictate how much information these companies must provide to the borrower. Nor is there an agency solely dedicated to regulating these loan providers and servicers. Although the CFPB recently vowed to supervise the actions of the seven largest student loan providers and servicers, including Sallie Mae and Nelnet, most student loan companies are left unregulated. As a result, many student borrowers are wrongfully charged fees or left in default because of loan provider and servicer actions.

Even if student borrowers realize that something is amiss with their loan or loan provider, they have nowhere to turn and no one to advocate for them. Nancy Hoover, Director of Financial Aid at Denison University, said that graduates are increasingly seeking the help of their alma mater's financial aid office, a department typically ill-equipped to handle their cases.

While the entire panel agreed that the degree of outstanding student loan debt is a detriment to the economy, Lindsey Burke of the conservative Heritage Foundation offered suggestions that would only compound the problem, including reducing the amount of federal Pell Grants available to students. When asked by Sen. Brown if she believed the loan provider and servicer industry should be regulated, she simply responded "no."

Sen. Elizabeth Warren (D-Mass.) and other Democrats disagree. Since last summer, Sen. Warren has been leading the charge on student loan reform. During the hearing she passionately reaffirmed her position that loan providers and servicers "must follow the law and not take advantage of people."

Sometime this week, Senate Democrats are expected to propose a bill that would allow student borrowers to refinance their loans to lower, fixed interest rates. This would certainly help student borrowers, but it will not completely ameliorate the serious burdens that they face. Loan providers and servicers must be held accountable when they trick, cheat, lie or withhold information, or else their deceitful tactics will continue, and students will pay the price.

Please join Sen. Warren and Campaign for America's Future in urging the Senate to allow existing borrowers their fair shot at student loan fairness.

$1 trillion <b>student loan</b> debt widens U.S. wealth gap, KU researcher <b>...</b>

Posted: 27 Mar 2014 09:23 AM PDT

Every month that Gregory Zbylut pays $1,300 toward his law school loans is another month of not qualifying for a decent mortgage.

Every payment toward their student loans is $900 Nida Degesys and her husband aren't putting in their retirement savings account.

They believe they'll eventually climb from debt and begin using their earnings to build assets rather than fill holes. But, like the roughly 37 million others in the U.S. saddled with $1 trillion in student debt, they may never catch up with wealthy peers who began life after college free from the burden.

The disparity, experts say, is contributing to the widening of the gap between rich and everyone else in the country.

"If you graduate with a B.A. or doctorate and you get the same job at the same place, you make the same amount of money," said William Elliott III, director of the Assets and Education Initiative at the University of Kansas. "But that money will actually mean less to you in the sense of accumulating assets in the long term."

Graduates who can immediately begin building equity in housing or stocks and bonds get more time to see their investments grow, while indebted graduates spend years paying principal and interest on loans. The standard student loan repayment schedule is 10 years but can be much longer.

The median 2009 net worth for a household without outstanding student debt was $117,700, nearly three times the $42,800 worth in a household with outstanding student debt, according to a report co-written by Elliott last November.

About 40 percent of households led by someone 35 or younger have student loan debt, a 2012 Pew Research Center analysis of government data found.

Allen Aston is one of the lucky ones, having landed a full academic and financial-need scholarship at Ohio State University. The 22-year-old software engineer from Columbus estimates it let him avoid about $100,000 in debt.

Without loans to repay, Aston is already contributing 6 percent of his salary to a retirement fund that is matched in part by his employer and doesn't have the same financial concerns his friends do.

"I'm making the same money as them, but they have student loans they're paying back that I don't. So, it definitely seems noticeable," he said.

At the other end of the spectrum is Zbylut, an accountant-turned-attorney in Glendale, Calif. He's been chipping away at nearly $160,000 in student debt since graduating in 2005 from law school at Loyola University in Chicago. Now 48, the tax attorney estimates he could have $150,000 to $200,000 in a 401(k) had the money he's paid toward loans gone there.

"I'm sitting here in traffic. I've got a Mercedes behind me and an Audi in front of me and I'm thinking, 'What did they do that I didn't do?'" Zbylut said by cellphone from his Chevrolet. He's been turned down twice for the type of mortgage he needs to buy a home big enough for himself, the fiancee he would have married already if not for his debts and her 10-year-old son.

"I have more education and more degrees than my father, as does she than her parents, and yet our parents are better off than we are. What's wrong with this picture?" he said.

Student debt is the only kind of household debt that rose through the Great Recession and now totals more than either credit card or auto loan debt, according to the Federal Reserve Bank of New York. Both the number of borrowers and amount borrowed ballooned by 70 percent from 2004 to 2012.

Of the nearly 20 million Americans who attend college each year, about 12 million borrow, according to the Almanac of Higher Education. Estimates show that the average four-year graduate accumulates $26,000 to $29,000 in loans, and some leave college with six figures worth of debt.

The increases have been driven in part by rising tuition, resulting from reduced state funding and costlier campus facilities and amenities. Compounding the problem has been a trend toward merit-based, rather than need-based, grants as institutions seek to attract the higher-achieving students who will boost their standings.

"Because there's a strong correlation in this country between things like SAT scores or ACT scores and wealth or income, the (grant) money ends up going disproportionately to students from wealthier families" who tend to perform better on those tests, said Donald Heller, dean of the Michigan State University College of Education.

Those factors, along with stagnating family incomes and declining savings, have made student loans a much bigger part of funding higher education, Elliott said.

Harvard Business School's Michael Norton wonders whether greater public awareness of the widening wealth gap in the United States would hasten policy change. Norton conducted a 2011 survey that found that people tend to think wealth is more equally distributed than it is.

But with elected officials from President Barack Obama on down now talking about the wealth gap as an urgent public problem, a more complete picture seems to be emerging, he said.

"Both parties are now saying, perhaps inequality has gotten to the point where it's not fair when people don't have a chance to rise, and we need to do something about it," Norton said.

Targeting the soaring cost of higher education, Obama in August proposed the most sweeping changes to the federal student aid program in decades. His plan would link federal money to new college ratings and reward schools if they help low-income students, keep costs low and have large numbers of students earn degrees.

Lawmakers in Congress also are debating how to address the issue, including proposals to allow graduates with high-interest loans to refinance at lower rates.

The American Medical Student Association supports expanding the National Health Services Corps, which provides loan forgiveness in exchange for service in underserved areas.

Nida Degesys, AMSA's president, graduated in May 2013 from Northeast Ohio Medical University with about $180,000 in loans. The amount has already swelled with interest to about $220,000.

"There were times where this would make me stay up at night," Degesys said. "The principal alone is a problem, but the interest is staggering."

Yet, as costly as medical school was, Degesys sees it as an investment in herself and her career, one she thinks will pay off with a higher earning potential.

College degrees can pay off. College graduates ages 25 to 32 working full time earn $45,500, about $17,500 more than their peers with just a high school diploma, according to a Pew Research Center analysis of census data.

Elliott says the country needs to re-think college financing options to bring debt down and graduation rates up.

"We can't," he said, "let debt hinder a whole generation of people from beginning to accumulate wealth soon after graduating college."
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Thursday, 5 June 2014

Student loan | S. 2292, Bank on Students Emergency Loan Refinancing Act - CBO

Student loan | S. 2292, Bank on <b>Students</b> Emergency <b>Loan</b> Refinancing Act - CBO

S. 2292, Bank on <b>Students</b> Emergency <b>Loan</b> Refinancing Act - CBO

Posted: 04 Jun 2014 12:00 AM PDT

Letter to the Honorable Elizabeth Warren

CBO and the staff of the Joint Committee on Taxation (JCT) have analyzed S. 2292, the Bank on Students Emergency Loan Refinancing Act, as introduced on May 6, 2014. The bill would allow most individuals with student loans (both federal and private) to refinance those loans into new federal direct loans at interest rates specified in the bill. Additionally, the legislation would amend the Internal Revenue Code to impose a new minimum tax—called the Fair Share Tax—on certain high-income taxpayers.

CBO and JCT estimate that enacting the bill would increase direct spending by about $51 billion over the 2015-2024 period and increase revenues by about $72 billion over the same period. On net, CBO and JCT estimate that enacting the bill would increase deficits over the 2015-2019 period by about $19 billion but reduce deficits over the 2015-2024 period by about $22 billion. (For this estimate, CBO assumes that S. 2292 will be enacted early in fiscal year 2015. As a result, there would be no budgetary effects in fiscal year 2014.) Details of the estimate are provided below and shown in the enclosed table.

Student Loans

Under S. 2292, eligible individuals could apply to have the Department of Education refinance outstanding federal student loans (direct or guaranteed) or private student loans (not federally guaranteed) that were incurred before July 1, 2013, at rates specified in the legislation. The Secretary of Education would have the authority to limit refinancing to individuals based on income levels and debt-to-income ratios that would be established by the Secretary.

As required under the Federal Credit Reform Act of 1990 (FCRA), costs of the federal student loan programs (other than administrative costs) are estimated on a net-present-value basis. Under credit reform, the present value of all loan-related cash flows is calculated by discounting those expected cash flows to the year of disbursement, using the rates for comparable maturities on U.S. Treasury borrowing. The cost of modifying existing loans is shown in the year the legislation authorizing such modifications is enacted, while the cost of new loans is shown in the year the loan is disbursed.

Outstanding Loan Volume. Based on information from the Department of Education, the Federal Reserve, the Consumer Financial Protection Bureau, and private-sector reports on student loans, CBO estimates that there is about $1 trillion in outstanding federal student loans or loan guarantees, and more than $100 billion in outstanding private student loans (that are not federally guaranteed). About two-thirds of the federal student loan volume is for federal direct loans and the remainder is for federally guaranteed loans. Most of the outstanding loan volume is for loans incurred after 2003, of which about one-third is for consolidation loans.

Consolidation loans are those in which the borrower has chosen to consolidate all of his or her loans into a single loan with a fixed rate. That rate is the weighted average of the interest rates of the loans being consolidated, rounded up to the nearest one-eighth of 1 percent. A little less than one-half of the outstanding volume of consolidated loans was created at times when interest rates were near or below the rates specified in S. 2292. Refinancing of those loans under S. 2292 would yield little or no savings for borrowers.

CBO estimates that less than 10 percent of federal student loan volume is currently in default. While the bill would not prohibit borrowers from refinancing federal loans that are in default, CBO expects that most federal borrowers who are in default would not refinance their loans because borrowers who have not made any payments on their loan for an extended period of time are unlikely to complete the application process for refinancing. In contrast, the bill would specifically prohibit borrowers from refinancing private loans that are in default and would further require that borrowers be current on their payments for six months. CBO estimates that for the first few years after enactment, a little less than 10 percent of private student loans will be in default or will not be current on payments for six months.

Refinancing Student Loans. The bill would allow the Secretary of Education to charge an origination fee of up to 0.5 percent of an outstanding loan, though CBO expects that the Secretary would probably charge less than that amount. In addition, all federally guaranteed loans refinanced under this program would be converted to federal direct loans, which would change the cash flows between the borrowers and the federal government. For private student loans, the government would pay off the existing private lender and issue a federal direct loan to the individual for the amount that was paid to the private lender.

Although there is no specific end date for potential refinancing under the bill, CBO expects that most of the loans that would be refinanced would go through that process over the 2015-2017 period. Because it would take several months to write and publish the necessary regulations and implement a system for refinancing loans, CBO expects that most of the refinancing would be completed in the latter part of 2015 and in 2016.

In estimating the cost of refinancing student loans, CBO accounted for the information presented above and the following factors:

  • Income limits and debt-to-income ratio. The bill would allow the Secretary of Education to establish income limits and debt-to-income ratios to determine who would be eligible to refinance their student loans. CBO expects that such guidelines would make only about 5 percent of the outstanding loan volume ineligible for refinancing.
  • Years remaining until repayment. The bill would allow any outstanding loan made before July 1, 2013, to be refinanced. CBO expects that the closer an individual is to paying off a loan, the less likely that person is to refinance, and the longer a person has left to repay a loan, the more likely that person is to refinance.
  • Interest rate. The bill specifies the interest rate for each type of refinanced loan. CBO expects that the bigger the amount by which a borrower's current interest rate exceeds the rate specified in S. 2292, the more likely that the loan would be refinanced. CBO also expects that loans that have interest rates close to or lower than those specified in the bill, such as many consolidation loans, are not likely to be refinanced.
  • Income-based repayment. Under the bill, individuals would have to apply to the Department of Education to refinance their student loans. CBO expects that the process of applying would lead more individuals to opt for the longer repayment terms and the possibility of eventual loan forgiveness that are features of the income-based repayment plans offered under current law. In addition, because people could refinance private student loans into federal loans under S. 2292, they could end up with a larger amount of federal loan debt and, thus, more likely to be eligible for income-based repayment.

Estimated Costs for Student Loan Refinancing. CBO estimates that about half of the outstanding loan volume for federal student loans and loan guarantees (about $460 billion) would be refinanced under the bill. Because of the lower interest rates on the refinanced loans, the federal government would receive less interest income over the life of the new loans, which would make those loans and loan guarantees more costly for the federal government. Thus, CBO estimates that enacting S. 2292 would increase direct spending for federal loans that are currently outstanding by $55.6 billion (on a present-value basis) in 2015.

CBO also estimates that about half of the outstanding private student loan volume (about $60 billion) would be refinanced under S. 2292. For budgetary purposes, those loans would be new federal loans. Under FCRA, new student loans generate income for the federal budget because the interest earned on new student loans is greater than the cost of financing those loans. Accordingly, CBO estimates that refinancing those private student loans would reduce direct spending by $5.0 billion over the 2015-2024 period. (Those costs are shown in the years that new federal loans are made and not in the year of enactment, because those loans would be considered new loans and not modified loans.)

Finally, there would be additional costs to administer the formerly private student loans; those costs would be recorded on a cash basis. Based on the administrative costs for existing loans, CBO estimates that those additional costs would increase direct spending by $0.2 billion over the 2015-2024 period.

Revenues

Under S. 2292, in 2015 a new minimum tax would be phased in for individuals with adjusted gross income between $1 million and $2 million; in later years, those thresholds would be indexed for inflation. Affected taxpayers would calculate the sum of their regular tax (after subtracting allowable credits except for the foreign tax credit), their alternative minimum tax, the 3.8 percent surtax on their investment income, and the employee's portion of the payroll tax. If that sum was less than 30 percent of those taxpayers' adjusted gross income (after deducting a credit for charitable contributions), they would pay an additional amount of income tax to bring their total taxes up to that level.

In total, JCT estimates that enacting this provision would increase revenues by $31.7 billion over the 2015-2019 period and $72.5 billion over the 2015-2024 period.

CBO: Export-Import Bank, FHA Mortgage Guarantees, and DoED <b>...</b>

Posted: 03 Jun 2014 06:38 AM PDT

What do the Export-Import Bank (Ex-Im), the Federal Housing Administration (FHA), and the Department of Education (DoED) have in common? A recent Congressional Budget Office (CBO) report suggests that these federal bodies share more than criticisms that their respective interventions have inflated bubbles in aircraft, housing, and student loan prices. The CBO finds that these programs are actually deep in the red, contrary to their administrators' claims of profits in recent years.

Released in May of 2014, the report estimates the expected budgetary costs of the DoED's four largest student loan programs, Ex-Im's six largest export credit programs, and the FHA's single-family mortgage guarantee program using CBO's "fair value" accounting method for FY 2015 to FY 2024. The report then compares these calculated costs to those reported by Ex-Im, the FHA, and the DoED. These federal bodies employ an unusual accounting method first prescribed by the Federal Credit Reform Act of 1990 (FCRA). The CBO found that the FCRA budget cost estimates were considerably rosier than the costs calculated by its fair-value method. Rather than saving taxpayers billions of dollars, as program administrators claimed, the CBO reports that these programs will actually cost taxpayers a combined total of roughly $120 billion over the next ten years.

This week's charts use data from this CBO report to display the discrepancies between the two accounting methods in each bodies' reported costs. The charts show that these programs are in a far more dire fiscal position than their administrators have reported to the public.

The first chart compares the total budgetary impacts projected through the FCRA accounting method to the projected budgetary impact estimated through the CBO's fair-value method. Each agency reported handsome profits using their own accounting methods: the DoED boasted of a -$135 billion subsidy cost (which translates to $135 billion in savings to taxpayers); Ex-Im projected $14 billion in taxpayer savings; and the FHA expected $63 billion in taxpayer savings over the next decade.

However, the CBO's fair-value method paints a bleaker picture. According to the CBO, DoED student loan programs are projected to cost taxpayers $88 billion; Ex-Im direct loans, guarantees, and insurance policies stand to cost $2 billion in tax dollars; and the FHA's single-family mortgage program is on track to cost taxpayers $30 billion by FY 2024. Rather than yielding handsome profits, the CBO's calculations project that these programs will cost taxpayers dearly.

The second chart displays the annual projected budget impact of both accounting methods for each agency in a time series. The chart suggests that, barring rapid reform, the concealed budget impact of each program will impose substantial costs on taxpayers for years to come.

In order to understand the large discrepancies between the calculations yielded by each accounting method, we need to first understand a few basics of federal budgeting. While most federal spending is recorded in the budget on a cash-flow basis that logs inflows and outflows at the time that they occur, these federal credit programs employ a special accounting method that records the lifetime costs of the program up front on an accrual basis. This means that inflows and outflows are logged during the year in which the loan in made, rather than the specific date.

The present value of each program is calculated by expressing current and future inflows or outflows in terms of a single value equivalent to a lump sum that would be received or paid today. This value, in turn, depends on the rate of interest that translates future cash flows into current values.

The discrepancies between the calculations yielded through FCRA accounting and those from CBO's fair-value accounting rest in the different interest rates that each method employs. The Ex-Im Bank's FCRA calculates present value using US Treasury securities rates as a guide. The CBO's fair-value approach, on the other hand, uses market interest rates to calculate the present value of expected future cash flows. A previous CBO report from May 2012 explains in detail how using market values can better account for the cost of the government's risk.

Supporters of the Export-Import Bank have defended its programs in part because the programs were believed to "make $1 billion for taxpayers." The Department of Education's student loan programs have been characterized as "a profit-making machine" for the federal government. The Center for American Progress praised the Federal Housing Administration's mortgage insurance program, gushing that "recent years are likely to be some of its most profitable ever, generating surpluses as these loans mature." This recent CBO report debunks these myths of profit-making federal programs and provides a compelling reason for dramatically reforming these programs so as to reduce federal spending on them over the coming decade.
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Tuesday, 3 June 2014

Student loan | Reid touts Senate student loan bill to UNLV students | Las Vegas ...

Student loan | Reid touts Senate <b>student loan</b> bill to UNLV students | Las Vegas <b>...</b>

Reid touts Senate <b>student loan</b> bill to UNLV students | Las Vegas <b>...</b>

Posted: 30 May 2014 12:47 PM PDT

U.S. Sen. Harry Reid on Friday met with student leaders at the University of Nevada, Las Vegas to promote a Senate bill that aims to reduce the $1.2 trillion debt burden graduates face across the country.

Some 40 million students have taken out loans to pay for university, college or other post-high school education, according to Reid, as tuition has increased 300 percent over the past decade.

"There's more student debt than there is credit card debt and that should give us all pause," Reid said at a news conference after meeting privately with about 10 student leaders at UNLV.

He said that a week from Wednesday the Senate will vote on a bill that would allow students to refinance their loans during a two-year period to current rates: 3.86 percent for undergraduates and 5.41 percent for graduate students. More than 250,000 Nevada graduates would be eligible to refinance, saving an average of $4,500 in interest.

Reid said when he attended college he was able to work his way through school and, with the help of his wife who also got jobs, pay for his own education. Now, jobs are too hard to find and higher education is too expensive, he said.

"I put myself through college, (but) you cannot do that anymore," Reid said.

Reid noted that growing student loan debt is bad for the economy, too, since graduates put off getting married, purchasing houses and spending money on other things because they must pay off loans first.

Nationwide, the average outstanding individual loan balance is $29,000.

At UNLV, the average debt burden of the 2012 graduating class was $21,126 per student, the university said, providing the latest statistics available. Some 40 percent of the 2012 graduating class had taken out student loans. With a class of about 3,000 students, the total debt burden for the class of 2012 would be about $63 million.

Many borrowers are locked into high interest rates — 7 percent or higher — according to Reid's office, and are struggling to keep up as one in seven borrowers default on federal student loans within three years of beginning repayment. As of September, 40 percent of student loans were in default, forbearance, or deferment, Reid's office said.

Although the student leaders said debt was a problem, they said the more urgent issue is a proposed 17 percent tuition hike over four years that they're facing, which in the end could boost student debt as well.

The Nevada Board of Regents plans to consider the proposed tuition hike at its June 5-6 meeting in Reno, the students said.

Tianna Winters, the editor of UNLV's Rebel Yell student newspaper, and a reporter for the publication, Alexia Shurmur, both asked Reid about the tuition hike and whether he thought it was fair to place more burden on students instead of having the state increase education funding.

Reid agreed with the students, saying that both Democratic and Republican governors of Nevada and the Legislature had "let down the students of the state by not adequately funding education."

Asked by the Rebel Yell whether he is opposed to the proposed tuition hike, Reid said, "I would hope we would not have a 17 percent tuition increase."

After the meeting, Winters said she sees a linkage between the tuition issue and growing student debt.

"That's going to affect students now," she said of the proposed tuition hike. "It goes hand in hand" with student debt.

Elias Benjelloun, UNLV's student body president, was in the meeting with Reid and said the students brought up the tuition problem. He said student government had come out against any tuition hike.

"Both are big problems," Benjelloun said of debt and tuition increases. "But I think for student government, right now for us we're focused on tuition. … We'll have a united front opposing the hike."

Now, the tuition at UNLV for the fall of 2014 is $191.50 per credit, not counting the cost of books, special course fees or housing.

Undergraduates taking 15 credits would pay $3,270 per semester or $6,540 a year if they are in-state residents. For out-of-state residents, the tuition would be $10,225.05 per semester or $20,450.10 per year, according to UNLV.

Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919. Find her on Twitter: @lmyerslvrj.
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Monday, 2 June 2014

Student loan | Student Loan Calulators to Help Payoff Student Loans | Student ...

Student loan | <b>Student Loan</b> Calulators to Help Payoff <b>Student Loans</b> | Student <b>...</b>

<b>Student Loan</b> Calulators to Help Payoff <b>Student Loans</b> | Student <b>...</b>

Posted: 29 May 2014 03:42 PM PDT

We just launched 6 new student loan calculators to help you save money while paying off your student loans!

Why did we create these student loan calculators? So far, we've provided lots of great content, strategies, and tips on repaying your student loans, like this blog post: "10 Questions to Ask Before Refinancing Your Student Loans", but it is hard to translate education and content into decisions without doing the math to understand the financial impact.

We believe our student loan calculators can help you build a student repayment strategy that ultimately saves you money, time, and frustration.

Without further ado, here are the 6 new student loan calculators:

1) Student Loan Comparison Calculator

The student loan comparison calculator is great for current college students who need to compare in-school student loans and graduates who want to compare student loan refinancing offers. You can compare multiple student loans side by side to help identify the total financial impact before making a big financial decision.

2) Student Loan Prepayment Calculator

Want to payoff your student loans early? The student loan prepayment calculator solves for how much in extra payments you will need to pay to get out of debt by X date. For example, imagine you currently have a 20 year repayment term on $45,000 of student debt and you want to payoff your student loans in 10 years. By increasing your monthly payment by $177, you will payoff your student loans in 10 years and save $19,932 in interest.

3) Student Loan Refinancing Calculator

Refinancing your student loans can be a big money saver, both in the short term and long term. Depending on the new student loan term and rate, you can effectively lower monthly payments and reduce the total interest you will pay over the lifetime. Use the student loan refinancing calculator to see how much you will save. For example, if you have $45,000 in student debt at 8.5% interest rate, and you refinance the total debt amount at 5%, you will lower monthly payments by $80/month and save over $9,600!

4) Student Loan Deferment Calculator

Need to put your student loan payments on pause? With student loan deferment you cause pause your student loans for up to 3 years depending on the loan type. Keep in mind, most instances when you enter into student loan deferment you will accrue interest on your student loans during this time period. The student loan deferment calculator will calculate the total interest you will accrue during deferment.

5) Student Loan Payoff vs. Invest Calculator

Have some extra money left over at the end of the month? The student loan prepayment calculator calculates if it is wiser to invest or prepay your student loans with any additional payments you might be able to make with free cash at the end of month. Even an extra $50-$100/month can have a huge financial impact on your student loans and investments! The general rule of thumb is that it is wiser to contribute your extra free cash to the highest interest rate product. For example, if your student loan has an 8% interest rate, and you found an investment opportunity that yields 6% interest return, you should focus on paying off your student loans rather than investing.

6) Student Loan Payment Calculator

Still in school or recently graduate and want to know how much your future monthly payments and interest will be? The student loan payment calculator answers these questions and helps you decide if this is an investment (student debt) that you can afford.
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