Student Loan Reform

Discussion in 'Politics, Religion, Social Issues' started by Rt&Dzine, Sep 21, 2009.

  1. Rt&Dzine macrumors 6502a

    Rt&Dzine

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    #1
    Student Aid Expanded While Subsidies to Private Lenders Eliminated

    Currently the government pays subsidies to lenders and guarantees the loans. This new plan would supposedly save the government more than $80 billion over 10 years. Special interest groups are against it. Banks that received bailout money are against having their government subsidies eliminated.

    House Bill passed . . .

     
  2. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #2
    I have to deal with sallie mae on a semi-regular basis for my private loans, the company could not be anymore ****ed up. Their customer support is terrible, I can't understand anyone, and simple tasks triple in complexity in a moments time. I emailed them earlier this year letting them know that I was glad the government was going to stop subsidizing their company with the federal loan programs they offer. :p I seriously hope they go out of business just in spite, maybe the company who buys up my loans will have a little sense.

    It would be nice to be able to get some Pell grants since I have to pay taxes for them. No longer eligible :mad:
     
  3. Rt&Dzine thread starter macrumors 6502a

    Rt&Dzine

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    #3
    I don't know if you're going to like this any better . . . :D

     
  4. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #4
    Hopefully it creates some jobs IN THE US, so I can understand whoever I talk to if I ever have to deal with them. I imagine the wait times couldn't get much worse.
     
  5. Shivetya macrumors 65816

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    #5
    Two things will happen

    #1. With the government assuming the complete cycle they should be able to go after your debt where ever you run off too. However the tax payer gets soaked.

    #2. Colleges will keep raising tuition costs because loans will probably be even easier to get.
     
  6. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #6
    Sallie Mae can go after your debt wherever you run off to also.

    To my knowledge federal loans are regulated on amount per semester and cumulative.
     
  7. Rodimus Prime macrumors G4

    Rodimus Prime

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    Oct 9, 2006
    #7
    So this is yet another bill that is known as" **** the middle class over some more".


    Does not really effect the rich since they do not need the money to help out there kids with college. Helps out the poor a hell of a lot more with MORE free money.

    But then you have the middle class whos parents make to much to qualify for pail grants but they do not make enough to help their kids out with school.


    I am sick and tired of Administration after Administration screwing over the middle class. This is yet another bill that does nothing to help out middle class. hell it is another bill that screws them over again.
     
  8. Desertrat macrumors newbie

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    #8
    OMB sez $40 billion saving, at best.

    A "however": Most private-sector loans are to students at four-year universities, and the loss rate is fairly low due to very active efforts to get repaid. Most federal loans are to students at the two-year community colleges and trade schools, where the loss rate is a good bit larger and the collection efforts are less.

    It is anticipated that the loss rates will increase, along with tuition increases predicated upon students finding it easier to get loans.

    'Rat
     
  9. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #9
    The private sector issues federal loans also, they take a bit off of the top for their services though. I don't see a problem with the government cutting out the middle man.
     
  10. Desertrat macrumors newbie

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    #10
    I dunno. Lemme say that I favor student loans at low interest, etc., etc.

    But, several things: No federal program has ever saved anywhere near as much as its proponents claim. No federal program's costs have not risen far beyond the original predictions. Those are just facts of life about our tax dollars.

    People being people, if loans are easier to get, more will get them (good) but more will default (bad). And, it would take more federal employees to administer an expanded loan program, which takes tax dollars for salaries and office overhead. The people in the private sector work on loan programs merely as part of their overall jobs, and not full-time--so they're useful in other ways.

    And, as I noted above, university tuitions will continue to rise because of the ease of getting larger loans. Those who are not eligible for such loans will see their own costs rise, but gain no benefit thereby.

    Probably a better deal would be to have the whole thing as a private-sector effort, with some sort of federally-provided insurance system. I guess. That would be the best-policed system, anyway, insofar as loan-recipient qualifications.

    'Rat
     
  11. it5five macrumors 65816

    it5five

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    #11
    Why have the middle man? It is entirely unnecessary. The private-sector does absolutely nothing here, except raise the interest rate on the loans given to students.

    Zombie Acorn is right, and I suspect most people who have gone to college recently/are currently attending support this student loan reform.
     
  12. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #12
    There is an issue though, the systems are by most part automated these days. You fill out your financial information and it gets ran through the system, they kick back a number which shows your financial eligibility (based on the numbers, all automated). At this point they already have calculated your eligibility and what loans you can get (this is on the FEDERAL side already, not the private side). They simply relay this information to sallie mae and then sallie mae cuts you a check. Sallie Mae didn't add any value to the process in fact it would have been just as easy to direct mail the check (which is basically what they are doing now).

    Sallie Mae does offer private loans (at much higher interest rates, trust me I know) and they basically act as a bank in these instances (credit check, etc).

    The only overhead that the government will have to add is customer service with increased volume, they already have default departments that take care of delinquencies and their ability to attach your assets is on a much higher level then what a private business would be (think IRS).
     
  13. Rt&Dzine thread starter macrumors 6502a

    Rt&Dzine

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    #13
    The current system is Corporate Socialism at its finest.

    The government will save $$$ by not paying subsidies to the banks. This is why Sallie Mae is lobbying against this. And there is a scheduled increase in subsidized loan rates from 3.4 percent in 2011 to 6.8 percent in 2012. The bill will block this.

    The government has been guaranteeing returns on the student loans of at several percent percent higher than commercial rates. Because it's basically risk-free for Sallie Mae, it keeps extending the loans and the taxpayer picks up the tab if the student defaults.
     
  14. Eraserhead macrumors G4

    Eraserhead

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    #14
    This sounds like it's very similar to the British system. It seems like a good bill.
     
  15. jw2002 macrumors 6502

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    Feb 23, 2008
    #15
    Agree. Prior to 2008 the private sector student loan companies were very parasitical. As others mentioned they were basically a middle man and weren't even directly involved in capitalizing the source $$$ of the loans that they were making. Furthermore, there were serious abuses at many universities with sweetheart deals and such in which students were presented with one-sided marketing and misled into signing up for loans with bad terms.
     
  16. Sun Baked macrumors G5

    Sun Baked

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    #16
    I've always told people to transfer student loans to credit cards as soon as the job situation looks shaky -- at least this way they can run away from all their debt in bankruptcy court, if they do it soon enough.
     
  17. Rt&Dzine thread starter macrumors 6502a

    Rt&Dzine

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    #17
    The consumer picks up the tab for their bankruptcies in the end.
     
  18. Desertrat macrumors newbie

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    #18
    it5five, there is no middleman. All the government is doing is reducing the risk to the lenders, just as the FDIC does with your checking account.

    The obvious problem with artificially low interest rates, of course, is that they lead to profligacy. Macro-scale, artificially low rates are a major contributor to the giant economic mess we are in now.

    Zombie Acorn, I'm certainly glad that nobody ever told a lie via their computer. Face to face, loan officers have much, much better odds in determining if an applicant is truthful.

    Rt&Dzine, have you heard/seen the ads for "forgiveness" of credit card debt if you owe $10K or more? That's from tax dollars given to BoA et al as part of all this bailout BS.
     
  19. abijnk macrumors 68040

    abijnk

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    #19
    Sounds like this a step in the right direction to me.
     
  20. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #20
    Your FAFSA forms that you must fill out are cross checked against your (and your parents if you are under 23) tax information, if you are willing to go to jail and pay major fines by lieing on those forms then more power to you.

    One thing that people may not understand is that federal student loans are not based on credit (which is why I find it odd that people say poor can't go to college). They are based solely on financial need. You can get up to $57k for college from the federal government with a 0 credit rating. The only time your credit comes into play is during private loans (non-federal supported) via sallie mae.

    The federal loans have to be paid back, they will garnish, attach bank accounts, or do whatever they need to to get it.

    Ive taken an extensive look at the system because I was ineligible until I was 23. Its economically beneficial to have a more productive work force, we can't do that if sallie mae is raping the students with high interest 10 year loans to the point that they are in a hole for the rest of their lives.
     

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