Obama's plan for student loans

[JayFarrar]

From the wire and reportedly to be in the State of the Union.

Obama will also call for caps on some student loans, limiting a borrower's payments to 10 percent of their income, and forgiving all remaining debt after 10 years of payment for those in public service work and 20 years for all others.

I think this is a fantastic idea and I don't know how people could argue against it.

 

[JackReacher]

Anyone know what the average payment and payment length is for student loans? I finished up in just about two years, and my payment is about $125 a month for God knows how long. Might be set up for 10, 15 years. Can't remember off the top of my head.

 

[playthrough]

Doesn't sound like a bad idea, but I wouldn't want to hear about doctors/lawyers who make a gazillion dollars a year skipping out on a balance just because it's been 20 years. I know some of those degrees require a gazillion dollars in loans, but if they can eventually afford it, they should pay it. I know that's not what this policy is about, but that's one area that came to mind for me.

 

[93Devil]

From the wire and reportedly to be in the State of the Union.

Obama will also call for caps on some student loans, limiting a borrower's payments to 10 percent of their income, and forgiving all remaining debt after 10 years of payment for those in public service work and 20 years for all others.

I think this is a fantastic idea and I don't know how people could argue against it.

Wouldn't this just cripple the lending institutions?

I have three college degrees, work in a school system (for 10 years now) and have tens of thousands still left on my loans. I consolidated all of them in 2002.

Does the lending instution just eat my loan in a few years?

 

[JackReacher]

I read this would cost the taxpayers around $1 billion.

 

[JayFarrar]

I'm looking for some numbers, but if your removed a student loan payment, that money would still most likely be spent, just on something else.
Buy a car, buy a house. Buy something and the net impact, would seem, that it would quickly pump some serious money into the economy.
Plus, it encourages new grads to go into public service, and that seems like a good thing as well.

 

[JackReacher]

Still, someone has to pay for those loans that are forgiven, right?

 

[93Devil]

I read this would cost the taxpayers around $1 billion.

That's it?

It seems like chicken **** when you think of all the money being thrown around these days.

 

[93Devil]

I'm looking for some numbers, but if your removed a student loan payment, that money would still most likely be spent, just on something else.
Buy a car, buy a house. Buy something and the net impact, would seem, that it would quickly pump some serious money into the economy.
Plus, it encourages new grads to go into public service, and that seems like a good thing as well.

That logic seems sound, but I have a feeling people would save the money instead. But we are Americans, and we do like to spend.

 

[deskslave]

It would certainly further remove any incentive to pay back a student loan at any kind of pace. As it stands, the interest rates on many of them (or at least on mine, since my college years wrapped around the turn of the millennium) are so low that you're actually better off making a minimum payment and investing any extra money you would have put toward a loan in something else.

The rate of return on even a basic investment is typically going to be higher than any interest charges you would save yourself by paying the loan off early.

I would also imagine that lenders would immediately eliminate any long-range payment plan that sees the balance of the loan extended over more than 20 years, wouldn't they?

 

[Layman]

From the wire and reportedly to be in the State of the Union.

Obama will also call for caps on some student loans, limiting a borrower's payments to 10 percent of their income, and forgiving all remaining debt after 10 years of payment for those in public service work and 20 years for all others.

I think this is a fantastic idea and I don't know how people could argue against it.

Wouldn't this just cripple the lending institutions?

I have three college degrees, work in a school system (for 10 years now) and have tens of thousands still left on my loans. I consolidated all of them in 2002.

Does the lending instution just eat my loan in a few years?

Two kinds of federal student loan programs actually exist. Stafford loans are money you borrow from a bank, with the Dept. of Ed. (DOE) backing (guaranteeing) the loan. Ford Direct loans, you borrow directly from the DOE / Treasury. Same basic loan program (terms, repayment, etc), although the Stafford program may have a slightly higher interest rate (but...they will work with you more, if you have repayment issues).

In the direct loan program, the feds would just eat the money. In Stafford (if it's allowed to continue.....that's the unspoken part of this...) the feds would have to repay the remaining amount to the lender.

 

[Starman]

Nothing Obama proposes or endorses will get passed. Period, end of story.

The GOP will enforce a cast-iron filibuster, and the Dems are too stupid/chicken**** to do anything about it.

 

[poindexter]

From the wire and reportedly to be in the State of the Union.

Obama will also call for caps on some student loans, limiting a borrower's payments to 10 percent of their income, and forgiving all remaining debt after 10 years of payment for those in public service work and 20 years for all others.

I think this is a fantastic idea and I don't know how people could argue against it.

Why is failure to pay your obligations a fantastic idea?

 

[Layman]

It would certainly further remove any incentive to pay back a student loan at any kind of pace. As it stands, the interest rates on many of them (or at least on mine, since my college years wrapped around the turn of the millennium) are so low that you're actually better off making a minimum payment and investing any extra money you would have put toward a loan in something else.

The rate of return on even a basic investment is typically going to be higher than any interest charges you would save yourself by paying the loan off early.

I would also imagine that lenders would immediately eliminate any long-range payment plan that sees the balance of the loan extended over more than 20 years, wouldn't they?

Standard repayment is a locked 10 years. No wiggle room (unless you consolidate, are in the process of getting back into good grace repayment after a previous default, which then makes it a whole new loan, etc etc).

Desk, you are theoretically / partially correct. But as someone who spent the better part of 2 decades in financial aid / enrollment management....99.99999999% of students coming out of college, don't have the financial knowledge / discipline to make your plan work. Actually, the BEST thing to do (as it's a flat rate w/ no early payment penalties) would be to add a little extra principal to each payment...IMO

 

[deskslave]

It would certainly further remove any incentive to pay back a student loan at any kind of pace. As it stands, the interest rates on many of them (or at least on mine, since my college years wrapped around the turn of the millennium) are so low that you're actually better off making a minimum payment and investing any extra money you would have put toward a loan in something else.

The rate of return on even a basic investment is typically going to be higher than any interest charges you would save yourself by paying the loan off early.

I would also imagine that lenders would immediately eliminate any long-range payment plan that sees the balance of the loan extended over more than 20 years, wouldn't they?

Standard repayment is a locked 10 years. No wiggle room (unless you consolidate, getting back into good grace repayment after a previous default, which then makes it a whole new loan, etc etc).

Desk, you are theoretically / partially correct. But as someone who spent the better part of 2 decades in financial aid enrollment management....99.99999999% of students coming out of college, don't have the financial knowledge / discipline to make your plan work. Actually, the BEST thing to do (as it's a flat rate w/ no early payment penalties) would be to add a little extra principal to each payment...IMO

But at least on my loan, there are a number of other payment options. I have whatever the longest one is -- not that it matters, as I've stuck it in forbearance until I find a damn job.

And of course they don't. But having said that, those financially undisciplined students are better off putting any money they do have toward credit cards, or even car loans, than toward their student loan.

 

[JackReacher]

When I went back to finish school, I somehow ended up getting loans from two different lenders. I'm not even sure how that happened, to be honest. So, I consolidated last spring, just before I was due to start re-payment. Pretty sure I'm paying on it for 180 months (15 years). Can't remember if I had the option to pay it off in 10 years. Probably so.

Edit: I think we pay an extra $80 a month on my loan, which will cut about 6 years off it.

 

[Layman]

Desk, are you sure they were all Stafford or Ford loans? If you took any private / alternative loans (for additional funding above the standard fed loan), or are repaying a Parent PLUS loan, you may have different repayment options.

I'd also say that most students have no business having their own credit cards at that point either. THAT'S a whole different story of predatory banking, though....

 

[Layman]

When I went back to finish school, I somehow ended up getting loans from two different lenders. I'm not even sure how that happened, to be honest. So, I consolidated last spring, just before I was due to start re-payment. Pretty sure I'm paying on it for 180 months (15 years). Can't remember if I had the option to pay it off in 10 years. Probably so.

Edit: I think we pay an extra $80 a month on my loan, which will cut about 6 years off it.

Ryan, if you were going back to school, you probably hit your federal loan cap & your aid office routed you into a private / federal loan combo, to cover the gap. Happens a lot (has to), particularly if you were at a private (pricier) institution.

 

[Boom_70]

It's subterfuge to try to win back the middle class.

 

[YankeeFan]

Oh great. Another, "Let's give people free stuff, and call it a success when people tell us that they like free stuff," program.

If you take a loan, you have a responsibility to pay it back. Nothing good will come of this.

But academics & bleeding hearts will love this, because they can go get some fancy degree and then go try to save the world. They'll pay 10% of their salary for 10 years & then walk away from the balance of the loan.

Great program.