Jib's Student Loan Analysis

Missouri Suspends College Capital Projects

2009-02-13T18:42:00.002-05:00

About Time.

This article at the St. Louis Business Journal explains that the Governor of Missouri has suspended building projects worth $107 million dollars.

He said that projects had to be suspended because the state student loan agency, the Missouri Higher Education Loan Authority, hasn’t been able to continue with payments to the state for college construction projects under a controversial plan created by his predecessor, Gov. Matt Blunt.

With the loans drying up to students, colleges will be forced to tighten their belts. If only colleges and universities would go all out and begin to compete on a low cost basis, and reverse the thirty years of 10%+ increases a year.

Deducting Student Loan Interest

2009-02-12T21:20:00.002-05:00

At Joe's Journal, he writes that the federal government should raise the amount of student loan interest that can be deducted from the current amount of $2500 to $5000 or more.

One way to mitigate this problem is allowing Borrowers to deduct the entire amount of their student loan interest.

We agree that students should be able to deduct the full amount of student loan interest paid, and we also realize that this should be a first step of many more.

If the relative repayments of a borrower are lowered through a higher tax deduction, lenders will simply make more money available, which will drive up college prices more, which will put the student ultimately in a worse position.

We think the full amount of student loan interest should be deducted, as Joe proposes. Furthermore, we think there should be a seven year cap on the repayment obligation of a student loan, whether federal or private.

Default Movie

2009-02-12T11:34:00.003-05:00

Over at www.defaultmovie.com several young San Fransisco based filmmakers have released a trailer on their upcoming movie.

Good luck guys!

Consolidation of Student Loans

2009-02-11T20:14:00.006-05:00

Many students have consolidated their student loans, both federal and private. The students can lock in a somewhat reasonable fixed federal rate (though it is higher than five years ago through congressional subsidy cuts).

Private loans are consolidated with variable interest rates. For now, the consolidated variable interest rates are low due to the weak economy and the Federal Reserve's attempt to "juice" the economy.

However, if investors in the US dollar ever take flight - if our dollar takes an inflationary path - these private loans will strangle the borrowers even more than now.

The macro economists are concerned with deflation right now, and this deflationary concern is keeping the variable interest rate low. Heaven help us if inflation returns.

Student Lender's Bailout was in May 2007

2009-02-11T20:02:00.003-05:00

This is perhaps the most disturbing aspect of the student loan crisis. The government bailed out the banks that were participating in the student loan market in May 2007, yet the banks have shown no mercy to the students who have fallen in the economy.

“We have some tough times coming, we are so used to doing what we want when we want,” Moult said. “Everybody is going to have to be re-taught. The younger generation is not in a good position right now.”

That is an understatement. This quote is taken from The Volante Online which sees the coming shortage of private student loan money.

We think that the shortage of money may help keep college costs down, and will be better for everyone in the long run. There will be short term pain, however.

Time to Cancel Student Loans?

2009-02-11T19:48:00.002-05:00

We agree with this Lansing State Journal article that wonders in written word whether it is a good idea to cancel federal student loans.

What a solution, I thought. Since many student loan borrowers have debt to government-funded programs, it would be easy for lawmakers to forgive the debts owed.

Indeed, it would be easy for the Federal Government to wipe the slate clean. If Bank of America gets $45 Billion at a time, why not students?

15,000 New Student Loan Defaulters a Month

2009-02-11T18:14:00.004-05:00

We think it is going to be much worse than 15,000 defaulters per month in a year's time.

For the most part, companies stop hiring before undertaking massive layoffs. With the daily news of lost jobs, it is doubly bad for new college graduates - they have almost no chance of finding work that can pay the bills.

“I’ve done what I’m supposed to do, and they’re holding me hostage,” says Judy Ellis

Nextstudent.com reports that the credit freeze is making it impossible for a student to come out of default status once he or she has entered that status.

And the economy has made it mighty easy to slip into the dreaded default status.

Suze Orman on the Student Loan Crisis

2009-02-10T23:26:00.003-05:00

From the Suze Orman Show. Interesting.

Student Lenders Prey on African-Americans

2009-02-10T17:24:00.004-05:00

The ten year default rate among African-Americans is close to 40% according to a study by the U.S. Department of Education.

Remember, it is in the bank's interest if a person defaults, because the loan quickly doubles, and then triples and quadruples or more within a few years.

The original debt and high fees can never be forgiven, and wages are forever garnished from the defaulter. Does not someone see the obvious problem with a system that targets a vulnerable ethnic group for, in fact, slavery?

Stimulus Bill Raises Loan Limit by $2000

2009-02-10T17:11:00.004-05:00

According to Andrew Kreighbaum of the Elpasotimes.com, the stimulus bill that recently passed the Senate (but still must go through the conference process), raises the federal Stafford student loan amounts.

Under the House bill, the amount a student could borrow from federal Stafford loans would increase by $2,000, allowing them to avoid taking out additional private loans with higher interest rates.

Additionally, poor students will be able to take advantage of the Hope Tax Credit and Lifetime Learning Credit according to the article.

We are completely for grants and credits - though we understand economics means that colleges will immediately raise prices by the same amount unless controlled.

Also, we have mixed feelings about the higher federal loan limits. It is good that students do not have to take a higher priced private loan, but again, if the colleges simply raise the tuition by a corresponding amount, the students suffer in the long run.

Auctioning Virginity to Pay Student Loans

2009-02-10T16:59:00.003-05:00

We have heard stories of banks and debt collectors who asked student loan defaulters to go to the blood, sperm or egg donor facilities to get a little bit of money to pay some of the fees.

Hopefully, Salliemae does not get any ideas from this story, where a young woman is auctioning her virginity to be able to pay back her student loans.

We wonder if the student loan lenders will by able to hire lobbyists to change the law so that once a student has student loans, his virginity belongs to the bank.

Student Loan Financing Congress in DC

2009-02-10T16:50:00.003-05:00

The 2009 Student Loan Financing Congress is scheduled to be held at the Ronald Reagan Federal Building in Washington DC over April 23-24, 2009.

Markwire reports that more than 40 leaders of the student loan industry will be featured in various venues.

Attendees will hear valuable insights and predictions for the student loans market in 2009 and beyond; pricing anomalies offering investment opportunities;

We are not sure how to interpret this partial quote. How do pricing anomalies offer investment opportunities?

Does this mean to buy defaulted loans, knowing that the government will pay and the bank can collect a second time with the student?

Student Loan Scam on the Michael Savage Show

2009-02-09T20:26:00.002-05:00

Student Loan Scam: The Most Oppressive Debt in U.S. History
—and How We Can Fight Back.. - Author: Alan Michael Collinge. JANUARY 29, 2009. MICHAEL SAVAGE Show.

Wow.

You can find more about Alan Michael Collinge and The Student Loan Scam at www.studentloanjustice.org.

Cost of College Up 489%

2009-02-09T12:19:00.004-05:00

The Chicago Flame published an article today describing the difficulty many middle and lower class families are having in paying for a college education for their son or daughter.

Geoff Berkheimer does a good job in pointing out the exponential increase in tuition that has taken place in the last decade or two.

The cost of attending college rose 439 percent since the early 1980s. The result has been increased dependence on federally-guaranteed student loans and, more recently, private loans to attend college.

Many people will lose access to college during this recession, however these same folks may be able to attend college in a few years without the resulting debt load if these tough times force colleges to lower fees and be price competitive.

Bankruptcy Option for Lenders

2009-02-09T12:01:00.003-05:00

Reuters has just reported that the student lender MRU Holdings, Inc. has filed for chapter 7 bankruptcy.

Moreover, laws cutting subsidies to such lenders has left these companies struggling for existence.

These companies existed largely because of government subsidies that they in turn kept as profits and large salaries for the senior management instead of low fixed rate loans for borrowers. During the Bush administration, the subsidies were cut, and now the companies are filing for bankruptcy.

The debt collectors may not go after the directors of MRU, but they will without a doubt continue to pursue any students who defaulted private loans that MRU issued.

Lenders Get Paid Twice

2009-02-09T11:23:00.000-05:00

Bob Fertik has written here that the Term Asset-Backed Securities Loan Facility (TALF) already includes buying up bad student loan debt.

An expansion of the Fed's Term Asset-Backed Securities Loan Facility (TALF) to include assets beyond the student-loan, auto-loan and credit-card debt it was set up to absorb...

Bold is my addition

Does this mean that private student loan lenders will get paid twice, first through the government and then through debt collectors on student for the rest of the student's life?

Hand in the Cookie Jar

2009-02-09T00:05:00.002-05:00

An article written a year ago at Investopedia indicates that the student loan industry has gotten caught with their hand in the cookie jar.

According to the article, the student loan lenders, both federal and private, used the same securitization model that the banks used for massively inflated loans for California houses.

Just as the price of a house in California rose to over 10 times the average middle class wage, the price of a good college education has risen beyond the reaches of the middle class. That is, unless the unlucky bloke takes on vast never ending debt.

Sallie Mae and a Dead Marine

2009-02-08T19:16:00.005-05:00

Sallie Mae has refused to forgive a private student loan that a marine owed according to www.boston.com. He died, and the loan was not forgiven, as his parents had cosigned the loan.

Marine Second Lieutenant Ian McVey was killed when a driver hit his motorcycle. He owed over $50,000 of private student loans that he had used to fund his engineering degree.

Edit: Sallie Mae agreed to forgive the debt in late January 2009.

Peter Schiff Predicts Student Loan Collapse

2009-02-08T18:20:00.003-05:00

This is a clip from an interview that Peter Schiff did with Bloomberg in April of 2008. We agree with Peter Schiff regarding his remarks in the first half of the video.

Do Students Benefit from the Stimulus Bill?

2009-02-08T17:35:00.002-05:00

This article from the AP describes new proposals under consideration in the upcoming stimulus effort.

The Pell grant may be raised, and there may be a more generous application of the Hope tax credit to poor students. Grants are good, as long as the colleges do not instantly raise the tuition by a corresponding amount, but we wonder how effective these measures really will be.

The Tuition Increases Must Stop

2009-02-08T11:43:00.006-05:00

Ann Wallace writes of another way colleges are raising costs, by capping the limit of credits that students may take per semester under the standard tuition schedule.

For example, Austin Peay State University will limit the number of credits per semester to 12 - that is only three classes of four credits - before it charges additional fees above full tuition.

According to the article, this action was no different than an 30% increase in tuition if a student takes a normal class load.

It will take the students five years to complete a four year degree if they follow the reduced class load. How can they afford to stay in school the extra year? The students cannot, in fact afford the tuition and must rely on greater student loans.

Or said another way, the reason why this school can raise tuition by 30% next year is because student loans are available. The reason why student loans are available in copious amounts is that student loan debt can never be canceled - and this means that a generation of young people are signing up to be life-long slaves.

The First Wave

2009-02-08T00:23:00.001-05:00

The storm is visible, the dark clouds are on the horizon. When will the first wave of student loan defaults hit? Yes, these defaults have already started, but we mean the first large scale defaults like the housing debacle.

We think December 2009 might be an important date.

The Coming Storm

2009-02-07T23:13:00.000-05:00

In a year or two, the fallout from a flawed system that many students in the United States must use for financing a college education will be much worse than today.

A new class of slaves will exist, having gone through the courts after defaulting on debt that can never be discharged (except in the most limited circumstances which includes death).

Furthermore, access to a college or university for many prospective and current students will cease as the money in 529 plans and other family plans has vanished in the down economy.

What is the best solution to this mess?

Seven Year Limit on All Student Loans

2009-02-07T21:48:00.000-05:00

In the bailout package being debated and soon to be passed, congress is discussing adding student loan and grant provisions as this article from the Union Leader highlights.

We are definitely in favor of increased government grants for students - especially for high achievers and socioeconomically disadvantaged students who have shown elements of success through their adversity.

However, we think too many loans are part of the problem. Government loans are better, as long as we keep the interest rates low and fixed. Private loans have been a disaster. Most have variable interest rates, and the bankers (the same ones who are being bailed out and buying $35,000 commodes) changed the law in 2005 so that private loans can never be discharged.

This private loan money has vastly increased the cost of colleges, as the universities realized that they could increase tuition 10%+ a year for decades, and larger loans would always be offered to the students.

The students had a choice - pay outrageous fees, or not be educated.

We think that there should be a seven year limit on the repayment period of student loans. If the loan cannot be re-payed in seven years, the private loan balance is forgiven, and the bank takes the loss.

The private loans will quickly be limited, and the colleges will be forced to cut costs to attract students. Maybe the $100 million dollar recreation center was a gratuitous want, not a educational need.

It is time for a Student Loan Jubilee

2009-02-07T21:36:00.000-05:00

This article by Jon Chattman at The Huffington Post is one of many that will be written over the next few years as college graduates are forced into slavery. And we mean literal slavery, as judges continue to mandate that all assets and income be turned over to the same banks that are being bailed out by large dollops of tax dollars.

Bankruptcy does not discharge student loan debt, and as the real economy worsens many will find that they have traded a chance for an education for a lifetime of misery.

Here at this site, www.studentloanjubilee.blogspot.com, we will attempt to report the coming flood of horror stories, analyze what has gone wrong, and discover reasonable solutions that are just.

We all need to work hard, but slavery must never come back to the United States.