Student Loan Crisis – How Does It Stand?

New presidents mean new policy, for the

Student Loan Crisis
Student Loan Crisis

student loan crisis, that meant re-instating

the 16 per cent collection fee on delinquent

student loan debt.

Although the fee was only stopped by the Obama administration last year, the New York Times bemoans its resurrection.

The Education Department’s decision to let guaranty agencies gouge struggling people is indefensible — not least because the additional fees bear no relationship at all to the expenses incurred by the companies. In addition to being unfair on its face, the decision to allow these fees will be likely to make the default problem worse.

The ire is mis-directed.  Whatever the merits of the collection fee, that is not the problem.

The problem is the bill of goods millenials have been sold on the value of a, well, any, college education.

Given that thinking, it should come as no surprise that more than 1.1 million people in the federal direct student loan program defaulted in 2016 alone — a rate of about 3,000 per day.

It isn’t the collection fee that drives them into default, obviously, as that is not assessed until after the default.

 Student Loan Debt Affects More Than Students

The growing pile of student debt is “obviously one headwind to economic activity” that “probably pushes in that direction of lower equilibrium real rates” because it limits households’ spending power, Dudley said Monday during a press briefing in New York.

Sometimes you wonder who’s minding the store.

During the briefing, Dudley and his staff presented data showing significant disparities in home-ownership between those who graduated from college with debt and those who graduated without it.

In 2016, almost half of all 30-year-olds who left college with debt between 2006 and 2011 had missed at least one of their required monthly payments, according to the New York Fed researchers. Nearly a third of them had defaulted, meaning they missed nine straight months of payments.

Do we really need a study to show that people without debt can buy more stuff, including homes, than people without debt?

This idiocy is how we got into the real estate bubble and the student loan crisis.

The government discovers that people who own their own homes are happier than people who do not.

So, it artificially subsidizes mortgages so more people can buy homes, It turns out that the government put a lot of people into mortgages that they could not afford, blowing up the housing market and creating lots of unhappiness.

The government discovers that people with college degrees, on average, make more money than people without college degrees, so it subsidizes college with student loans.  The colleges keep the tuition money whether the student loans are repaid or not and regardless of whether the graduates are employable.

Colleges know a good thing, add worthless courses and majors, lower admission standards, and make more money.

Tuition skyrockets, and instead of college graduates making more money, we have 5,000 janitors with masters degrees.

“Free” college, an idiotic option suggested by the Fed governor quoted in the article linked to above, is a misnomer.  Somebody pays for it.  Why should folks who skipped college to enter the work force be taxed to subsidize those who opted for college instead?

Among other reforms, bankruptcy laws need to be changed to get people back into the system.

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Student Loan Crisis - How Does It Stand?
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Student Loan Crisis - How Does It Stand?
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Student loan collection costs back up, is free college the answer?
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