Student Loans Hit Seniors

[Thailandnotes]

"It seems that Congress has removed nearly every consumer protection from student loans, including not only standard bankruptcy protections, statutes of limitations, and truth in lending requirements, but protection from usury (excessive interest). Lenders can vary the interest rates, and some borrowers are reporting rates as high as 18-20%. At 20%, debt doubles in just 3-1/2 years; and in 7 years, it quadruples. Congress has also given lenders draconian collection powers to extort not just the original principal and interest on student loans but huge sums in penalties, fees, and collection costs.

"The majority of these debts are being imposed on young people, who have a potential 40 years of gainful employment ahead of them to pay the debt off. But a sizeable chunk of U.S. student loan debt is held by senior citizens, many of whom are not only unemployed but unemployable. According to the New York Federal Reserve, two million U.S. seniors age 60 and over have student loan debt, on which they owe a collective $36.5 billion; and 11.2 percent of this debt is in default. Almost a third of all student loan debt is held by people aged 40 and over, and 4.2% is held by people over the age of 60. The total student debt is now over $1 trillion, more even than credit card debt. The sum is unsustainable and threatens to be the next debt tsunami."

http://www.truthdig.com/report/item/...s_20120511/?ln

[shiny!]

Re: Student Loans Hit Seniors

It's not like the people with student loan debt can default and bring the system down. What's going to happen when the gov't starts garnishing the social security of retiring baby boomers with unpayable student loan debt? Will they really do it? Long-term unemployed people are also getting student loans to live on as their unemployment benefits end. I wonder how this is going to play out.

[don]

Re: Student Loans Hit Seniors

As the media wheels of co-opting begin to turn, a gadfly dreams of rebellion . . .

from today's Sunday Times front page story on student debt - major piece, with online interactive graphics, etc.

A Generation Hobbled by the Soaring Cost of College

and Jim Kunstler's 2-cents on FIRE's academic malaise . . .

Is there a Baby Boomer so dim in this land of rackets and swindles who thinks that he or she will escape the wrath of the Millennials rising? The developing story is so obvious that only an academic economist could fail to notice. Here's how it will go: some months from now, as the financial unwind worsens, and the mirage of gainful employment shimmers away to nothing, and the technocrats of Europe meet nervously by some Swiss lakeside (and are seen glumly shaking their heads), and Romney and Obama try to out-do each other peddling miracle cures for the tanking national self-esteem - a dangerous meme will go forth across the internet, and this meme will say: Millennials, renounce your college loans and set yourselves free!

And then something truly marvelous will happen. They will at once dis-empower the swindling generation of their fathers, teachers, loan officers, and overlords and quite possibly bring on, at long last, the epochal collision of pervasive American control fraud with the hard hand of reality.


I think this will happen, and I would venture even to set the meme loose here and now and watch it go viral. The college loan racket has been an even more cynical enterprise than the mortgage racket was because so many people who ought to have known better, people of supposed intelligence such as college deans, cabinet secretaries, and think-tank Yodas, all colluded to support the false promise that the gigantic cargo cult of higher ed would keep churning out fresh careers forever - when the truth was that the entire groaning vessel of hopes and dreams was already under water and sinking into the eternal darkness.

And is there a Millennial so dim who believes that the promised package of lifetime goodies once called "a job with benefits" waits like a liveried servant to conduct them without friction through the ceremonies of career and family according to premises and promises of an obsolete American Dream? Dreams do die hard. As dreams go it was a pretty good one while it lasted, but like all dreams, it has vanished in the mists of a new morning leaving the dreamers half-sick, anxious, and drained. They have nothing to lose but their fears of the re-po man and the simulated dudgeon of telephone robot debt-collectors.


This idea should catch on as the election season heats up. Like the anti-war youth of August, 1968, burning their draft cards in the streets of Chicago, the Millennials should flock to Charlotte and Tampa this summer and fill the parking lots (there are no streets in these places) with the smoke of their burning loan contracts - and then proceed with the loud repudiation of party politics in its two current useless, lying, craven, feckless factions. The effrontery of these rogues, promising a hundred years of shale gas, and jobs, jobs, jobs, and a personal relationship with Jesus! Send them packing into the bowels of history, then go home and make it work locally, where it will have to happen in any case because the arc of events has a velocity of its own now and that is our certain destination.


The colleges themselves will, of course, implode shortly, along with everything else currently organized on the super-gigantic scale. They are no more prepared for what is about to happen to them than the chiselers in government, banking, medicine, and global corporate enterprise. We will wonder in retrospect how they ever managed to winkle 50-grand a year for their absurd promises, and how we permitted young people with undeveloped powers of judgment to sign their financial lives away on terms even more stringent than their parents' mortgages. When the universities do go down, tossing their employees overboard in the process, it will be interesting to see the former faculty chairpersons and distinguished professors of econometric modeling learn how to plant kale and care for chickens side-by-side with their formerly-indentured students. I can imagine a period of turmoil in America even harsher than, say, the Cultural Revolution of the 1960s in China where officials, professors, and authorities of all kinds were paraded through the angry mobs wearing dunce caps. Weird things happen history.


The college loan money will not be paid back anyway, so Millennial youth ought to seize the golden opportunity to make the deliberate point that the years of swindling are officially over now. This strange jubilee could, and should, change everything.

http://kunstler.com/blog/2012/04/strange-jubilee-1.html

[mmr]

Re: Student Loans Hit Seniors

That assumes that there will continue to be social security benefits to garnish, which, once the government can no longer find debt buyers so that it can continue borrow 30%+ of what it spends every year, may no longer be the case.

The good news (if you can call it that) is that the upcoming "poom" will reduce the burden of this debt (at least for those who have income going forward.)

[shiny!]

Re: Student Loans Hit Seniors

That assumes that there will continue to be social security benefits to garnish, which, once the government can no longer find debt buyers so that it can continue borrow 30%+ of what it spends every year, may no longer be the case.

The good news (if you can call it that) is that the upcoming "poom" will reduce the burden of this debt (at least for those who have income going forward.)

I'm expecting stagnant wages in this Poom, making it all the more painful, but I know nothing.

[shiny!]

Re: Student Loans Hit Seniors

... Like the anti-war youth of August, 1968, burning their draft cards in the streets of Chicago, the Millennials should flock to Charlotte and Tampa this summer and fill the parking lots (there are no streets in these places) with the smoke of their burning loan contracts...

... The college loan money will not be paid back anyway, so Millennial youth ought to seize the golden opportunity to make the deliberate point that the years of swindling are officially over now. This strange jubilee could, and should, change everything.

http://kunstler.com/blog/2012/04/strange-jubilee-1.html

The author completely misses the obvious, that they can't repudiate their loans. There won't be a student loan debt jubilee. Their wages will be garnished until those loans are repaid. The only way out of those loans are death, severe disablement, or working the rest of their lives in an underground, cash under the table economy.

[mmr]

Re: Student Loans Hit Seniors

If I had to guess, I'd think that wages for some people with high-demand skills would at least keep up with inflation, but that wages for other groups (including most workers in the FIRE sector or sectors dependent on discretionary spending, such as travel) will not, for those who still have jobs at all.

[Polish_Silver]

Re: Student Loans Hit Seniors

Congress has removed nearly every consumer protection from student loans, including not only standard bankruptcy protections,

The high interest rates would definitely be a problem. But I wonder how widespread that problem is.
People are not savvy about debt contracts and thier needs to be a lot of restrictions on them.
Would anyone actually agree to a 15% interest rate?

I wonder if these things are the problem:

1) Cost of getting a BS degree has risen faster than median wages. (I don't know if that's true)

2) Financial aid used to be mainly grants, now more of it is loan money.

3) Because of (1) , parents are less able to help their children, and children are less able to work thier way through
school.

4) College degree does not get many students a job sufficient to pay back their loans.

In principal, there is nothing wrong with making graduates pay for their education. Since graduates would have no property, declaring bankruptcy is too easy for them.
However, private colleges and "loan sharks" may have overstated the value of borrowing to fund a degree.
I don't know how to solve the problem, but the root problem seems to be that people borrowed money for an education that does not bring them sufficient income.

[don]

Re: Student Loans Hit Seniors

If I had to guess, I'd think that wages for some people with high-demand skills would at least keep up with inflation, but that wages for other groups (including most workers in the FIRE sector or sectors dependent on discretionary spending, such as travel) will not, for those who still have jobs at all.

"those who held unionized or government jobs were initially hedged as well because the governemnt simply granted wage increases commensurate with inflation."

from Currency Wars (p.58) on the 2nd Currency War (1921-1936). The above reference is to Weimar. Recommend the read . . . so far.

[Thailandnotes]

Re: Student Loans Hit Seniors

The author completely misses the obvious, that they can't repudiate their loans. There won't be a student loan debt jubilee..

Maybe. I've seen estimates that 10 % of student loans are now in default. That's 100 billion dollars out of the total 1 trillion.

As I understand it, the student loan overhaul passed by congress limits the amount of money that can be garnished from your pay check to 10 % of the money left after taxes. If you are a teacher, your loan is forgiven after ten years. That said, Bloomberg reports many collection agencies are pressing people in default for much higher payments.

I think it's much more likely that college enrollment will continue to drop. No doubt many of the recent graduates profiled in this article would advise against following in their footsteps.

http://www.nytimes.com/2012/03/25/ma...pagewanted=all

[dcarrigg]

Re: Student Loans Hit Seniors

Maybe. I've seen estimates that 10 % of student loans are now in default. That's 100 billion dollars out of the total 1 trillion.

As I understand it, the student loan overhaul passed by congress limits the amount of money that can be garnished from your pay check to 10 % of the money left after taxes. If you are a teacher, your loan is forgiven after ten years. That said, Bloomberg reports many collection agencies are pressing people in default for much higher payments.

I think it's much more likely that college enrollment will continue to drop. No doubt many of the recent graduates profiled in this article would advise against following in their footsteps.

http://www.nytimes.com/2012/03/25/ma...pagewanted=all

There is a limit, but it's 15% now.

Good point. It is congress' fault, not societies. Bipartisan skullduggery it is. Here's a timeline of how it went down.

1976 - Department of Education regulations altered to prevent government loans or loans made directly by a not-for-profit institute of higher education from being discharged in bankruptcy during the first five years of repayment. Unless they represented undue hardship.

1979 - For the first time this is in place with the force of law - not just regulation.

1984 - The 1979 law is altered to exempt the words "institute of higher education." This opens the door for not-for-profit financial entities to get in on the action.

1990 - The law is altered to replace the number "5" with the number "7."

1991 - Two law changes this year. The first eliminated the statute of limitations on collections, and the second allowed a 10% garnishment of wages.

1996 - Law changed to allow for withholding of Social Security payments for those who default on student loans.

1998 - The number "7" is removed from the law entirely. Student loans from not-for-profit sources (government, credit unions etc) are now completely non-dischargeable in bankruptcy.

2001 - A DoEd regulation standardizes a 15% garnishment rate from wages and Social Security payments.

2005 - For-profit section added to law. Loans from any financial institution are now non-dischargeable. All student loans are now completely non-dischargeable in bankruptcy.

2006 - 15% wage and Social Security garnishments now law instead of just regulation.


So that's it. It is something new. You can see these kids are viewed as prey by the law now. It is different than it was. One simple law would fix this, of course, but both the government and the banks are beneficiaries at this point, so...well, let's just keep it polite and say it would be a tough sell.

[Polish_Silver]

What are they thinking--if anything?

was higher than the national average, and student-loan debt, at an average of nearly $25,000,

from the NYT article

Inflation adjusted, I had about $25k of 2012 dollars in debt in 1984. However, my employment prospects were decent.

Before the housing bubble, what were the liberal arts majors expecting to happen ?

Drew is unusually expensive; tuition plus room and board run more than $50,000 a year

.

I'd say that is an outrageous price to pay unless you have money saved or marketable skills! Are these students even thinking at all?

As for the seniors, is this part of "O'bama wants you back in school"? --borrowing to be there?

How do seniors have student loan debt? I don't get that at all.

[shiny!]

Re: What are they thinking--if anything?

How do seniors have student loan debt? I don't get that at all.

I don't know about other people, but my late husband, who had a bachelor's in education, took out a loan from the Dept. of Ed. when he was 45 in order to get a Master's in Special Ed. He had a dual masters for both Gifted and SED (severely emotionally disturbed) Special Ed. There was a program in place whereby people who graduated in the years before he graduated and taught for five years in a hardship area got their loans forgiven. Same for the people who graduated the years after he graduated. But he fell through a crack. He taught Special Ed. in hardship districts until the day he died, but couldn't get his loan forgiven.

We moved several times, each time unexpectedly. When a teacher goes to a new school district, he or she starts low on the pay scale regardless of their experience. With each move, his pay was started at the 5th-7th rung, even though he had over fifteen years experience. By the time he died at age 61, he had 25 years experience teaching, but was being paid at 13 years on the payscale. He was only making about $40,000 a year. He still owed the bulk of his student loan and wouldn't have been able to pay it all off before retirement.

There are people who will say that he should have known better, should have read the fine print better. What can I say? He was a brilliantly gifted teacher, but not wise in the ways of money. If anyone deserved to have their student loan forgiven, he did.

[lakedaemonian]

Re: What are they thinking--if anything?

I don't know about other people, but my late husband, who had a bachelor's in education, took out a loan from the Dept. of Ed. when he was 45 in order to get a Master's in Special Ed. He had a dual masters for both Gifted and SED (severely emotionally disturbed) Special Ed. There was a program in place whereby people who graduated in the years before he graduated and taught for five years in a hardship area got their loans forgiven. Same for the people who graduated the years after he graduated. But he fell through a crack. He taught Special Ed. in hardship districts until the day he died, but couldn't get his loan forgiven.

We moved several times, each time unexpectedly. When a teacher goes to a new school district, he or she starts low on the pay scale regardless of their experience. With each move, his pay was started at the 5th-7th rung, even though he had over fifteen years experience. By the time he died at age 61, he had 25 years experience teaching, but was being paid at 13 years on the payscale. He was only making about $40,000 a year. He still owed the bulk of his student loan and wouldn't have been able to pay it all off before retirement.

There are people who will say that he should have known better, should have read the fine print better. What can I say? He was a brilliantly gifted teacher, but not wise in the ways of money. If anyone deserved to have their student loan forgiven, he did.

My sister is a teacher, and thankfully works in a very well paying school district, easily in the top 5% nationwide....she is safe for the foreseeable future, but she's only in her late 30's. She has 30+ years to go until retirement.

I know a bunch of other teachers....most are in a far worse situation than my sister....earning fairly low wages.

I wonder if the low wage structure for teachers combined with often untenable student debt levels to achieve professional requirements is quite similar to pilots?

I've flown into LAX enough times and know the area well enough to have seen this:

http://articles.latimes.com/2009/jul...e-lax-colony20

from the road...I think you can see it from Sepulveda.....

I wonder if these situations are like mass customized, personalized output gap traps.......tangible and individual version of what the country is facing.

Inability to achieve enough gross income growth to cover the debt....a failure to achieve personal(or national) escape velocity.

[lektrode]

Re: What are they thinking--if anything?

http://articles.latimes.com/2009/jul...e-lax-colony20

and to think i was ahead of the curve/herd on this (by sleeping in my mobile office at the marina)
but they dont have the ocean view that i had... and THEN there was the view of the beach shower... ;)

I wonder if these situations are like mass customized, personalized output gap traps.......tangible and individual version of what the country is facing.

Inability to achieve enough gross income growth to cover the debt....a failure to achieve personal(or national) escape velocity.

would say youre spot on with that one, Ld... its precisely why i did it, aside from the convenience of having all my tools etc located close to the job - and not having to go out into the trafficjamfromhell at the end of the day...
hadnt planned on it, was always the 'backup plan' - but funny how backup plans end up being the only option..
in my case, was after the landlord had got a bit too greedy (800 to 900 to 1100 in only 2 years = FU man, i'm outa here) and thot it would only be for a couple years (in 2005) - was a damn good thing i made that move tho - 4 years later and into the depression - would've been screwed, had i not done it (and the savings paid for my house)

finally had to give it up tho, was getting too depressing (livin in a parkin lot, even for only a couple daze/week, aint all glamour - even for airline pilots, i'm sure - even after having a little party the 1st of every month "hooray! there's another 1100 in MY acct...)