
U.S. Stepping Up Enforcement on Delinquent Student Loans - etaioinshrdlu
https://www.bloomberg.com/news/articles/2019-05-12/u-s-stepping-up-enforcement-on-delinquent-student-loans
======
nimbius
Disclosure: I work as a blue-collar engine mechanic. Ive never been to
college.

That having been said, im familiar with debt after the 2008 housing collapse.
I lost my truck and my trailer home, partly because of a shady home loan and
partly because well, my employer went out of business. That having been said
it was relatively easy to discharge these debts. the bank wasnt too upset
about the home and offered to help me restructure payments, which I agreed to
until I found someone else to buy it from me. The truck I sold back to the
dealership...which incidentally also went bankrupt, but they were easy to work
with.

I know people in this town with student loans that show up at the local
watering hole every week and count their beers in dollars and their tips in
change. One of them got her license revoked because she wasnt able to make
student loan payments, and had to move back in with her folks. Because she has
outstanding student loan debt, she cant qualify for section 8 housing or food
stamps. Even her family gets harassing calls about the money she cant pay back
fast enough.

She is a biologist, but all of her money goes straight to the loans. it has
for 9 years now.

Why is it I can ditch close to 90 grand in loans lickety-split but students
cant? how is education any different?

~~~
Lazare
The logic runs like this:

A _secured_ loan should be easy and cheap to get, because if it goes bad, the
lender can reposes the collateral. This is like your house and the truck; you
ran up some debt, it didn't work out, you lost them both, but you also lost
the debt.

An _unsecured_ loan should be harder to get and pretty expensive, because it's
riskier. If I run up $20k on my credit card paying for a fancy vacation, then
can't pay, they can't take that vacation back from me. If I declare
bankruptcy, I get a "free" vacation (I mean, not exactly, bankruptcy is
complicated and expensive, but...) That's why credit cards run a 16% interest
rate.

Student loans are for an education, which you can't repossess, but we also
don't want to carefully vet applicants or charge them 16% interest rates. To
try and square the circle, we've decided that student loans will be super easy
to get and have very low rates, but then to try and avoid abuse we've decided
they can't be discharged in bankruptcy. And then to try and avoid people being
stuck with massive loans they can never repay, there's a bunch of complex
income-based repayment plans and schemes where you can get balances forgiven
in some cases.

> Why is it I can ditch close to 90 grand in loans lickety-split but students
> cant? how is education any different?

Education debt is different due to the combination of being inherently riskier
than, say, a mortgage to buy a house, while still being something we want
widely and cheaply available.

That being said, your biologist friend may have some better options if she
looks into it.

~~~
acct1771
> we also don't want to carefully vet applicants

Sounds like you don't want to vet them at all, when carefully vetting would be
a good answer.

~~~
Lazare
> Sounds like you don't want to vet them at all

I'm struggling to understand how you could read my comment and feel like you
have _any_ idea what I think should be the case. I am making a _positive_
claim about US politics, not a normative claim about how it should be.

> when carefully vetting would be a good answer.

No doubt you have a citation for this? An example country that has implemented
this with excellent outcomes?

------
rayiner
I’m convinced you can’t fix the education problem in the US until you can fix
the demand side as well. Where I live in Maryland, you can do two years at the
local community college (which is excellent) for $8,000 in tuition and fees
(total), before finishing up at a four year-college. Very few people take
advantage of the opportunity.

Why are people clamoring for free college when they’re not using the cheaper
options that are already available? Say we had free tuition at public
colleges. Would we be able to get rid of federal student loans in that case?
Or would people just turn their nose up at public colleges, and demand the
government pay tuition for private schools? There is something psychologically
messed up on the demand side.

~~~
throwawayjava
_> Where I live in Maryland, you can do two years at the local community
college (which is excellent) for $8,000 in tuition and fees, before finishing
up at a four year-college._

This is true for the majority of students, but not generally true for the top
~1-10% of students who often need all 4 years to compete for slots at top law
schools, med schools, phd programs, and employers. And getting into the top
4-5 of any of those things (except maybe phd programs, outside of a few fields
like CS) will pay itself back in spades.

I'd be curious to see a study that figures out who _thinks_ they are in that
1%-10% vs. who actually is. I.e., are people just being idiots, or are they
over-estimating the trajectory of their early career?

Also, even for the other 90%, the same is true for lots of stuff. Including
housing and vehicles. People aren't rational.

~~~
tptacek
That explains why a small elite who likely don't need assistance with loans
don't avail themselves of community college, but doesn't say much about the
general case.

~~~
throwawayjava
To reiterate, the question I'm asking is: how many people think they're the
small elite but are actually the general case?

I.e., how many people are acting irrationally vs. how many people are
misjudging their own place in the world?

------
wpdev_63
For people struggling with paying their student loans, their federal loans
offer the option of being able to go on an income based repayment plan[0]. I
haven't done it personally.

The biggest problem with the US higher education system is that the
universities have very little skin in the game. The government more or less
prints money and 'loans' it out to students and props up the universities. If
the government wasn't propping up the universities there wouldn't be a 1.3
trillion dollar student loan bubble[1] and the degrees that aren't worth the
paper they're printed on would disappear.

[0]:[https://studentaid.ed.gov/sa/repay-
loans/understand/plans/in...](https://studentaid.ed.gov/sa/repay-
loans/understand/plans/income-driven)
[1]:[https://www.bloomberg.com/news/articles/2018-12-17/u-s-
stude...](https://www.bloomberg.com/news/articles/2018-12-17/u-s-student-loan-
debt-sets-record-doubling-since-recession)

~~~
snarf21
Exactly this. Prices started doubling when everyone starting getting loans. At
the same time we need more craftsmen and tradespeople. The lesson is that if
you give out free money, people will fight to be the first to get it.

------
nickles
> Hypothetically, a member of the Class of 2019 with $50,000 in loans would
> owe about $550 per month over the next decade -- or $20 daily. (Assuming 6%
> annual interest and a 10-year term.)

This article misrepresents the nature of student debt in the United States.
The average student graduates with 60% of the debt in Bloomberg's hypothetical
scenario ($29,800) [0] with a fixed rate of 5.05% [1]. This leads to a monthly
payment of ~$320 with a 10y term, 58% of Bloomberg's calculation. Student loan
debt is absolutely a major problem, but it's important to rely on facts, not
hypothetical scenarios.

[0] [https://studentloanhero.com/student-loan-debt-
statistics/](https://studentloanhero.com/student-loan-debt-statistics/)

[1] [https://studentaid.ed.gov/sa/types/loans/interest-
rates](https://studentaid.ed.gov/sa/types/loans/interest-rates)

------
lgleason
I don't envy people on the receiving end of this.

That said, it sounds like it's part of the trend to begin to put pressure on
the universities by making student loans less attractive. If there are
consequences for racking up large student loans that you can't pay people may
think twice about taking them on.

For years Universities have been increasing tuition on well beyond the rate of
inflation, often for degrees that have no real market value, with the money
going mostly to administrators not the ones actually creating and teaching the
material. Unless you start to put pressure on the funding source etc. there is
no way to begin to reign this in.

~~~
crooked-v
Pressure on student loan repayments isn't going to change anything if the
loans still have the same availability in the first place.

~~~
lgleason
If the executive order signed in March does what it says it will I would not
be surprised if that changes as well...IE: shifting some of the liability for
non-payment back on the university and requiring them to state what the
default rate is for graduate. IE: IF you take on this loan, how likely will
you be able to pay it back later on.

[https://www.foxbusiness.com/economy/trump-pursuing-ways-
to-h...](https://www.foxbusiness.com/economy/trump-pursuing-ways-to-hold-
colleges-accountable-for-student-loan-debt-free-speech)

~~~
throwawayjava
The executive order doesn't actually do anything about debt.

It just requests reports from various agencies, which will then be used to
help shape policy in 2020 when the Higher Education Act is reauthorized.
Similar reports have been requested by previous administrations, to little
effect.

The EO was largely about free speech at research universities, which is
extremely narrow and ignores the really problematic institutions both in terms
of free speech and in terms of student loan debt.

The free speech rules apply to places like UC Berkeley and UIUC (who are
already obligated to follow 1A, and who the courts are adequately dealing with
when the don't) but not places like Wheaton College and Cedarville University
(both of whom will fire tenured faculty for not being Christian or Republican
enough, and expel students for being unapologetically homosexual).

Because the oversight is targeted at research institutions, it also completely
ignores for-profit institutions where 50% of students fall into default as
well as non-research private institutions which are often far more expensive
than their public counter-parts.

Both are by design -- requiring free speech and financial accountability from
_any_ recipient of federal student loan money would put lots of conservative
christian colleges in very hot water...

~~~
jtbayly
And wouldn’t make an ounce of difference in the student debt problem, given
the small numbers of students at private Christian schools.

It’s also worth pointing out that other private schools, such as Vanderbilt,
would also be in a lot of hot water for similar reasons.

------
godzillabrennus
You can wring a dry towel and all you want but never get a drop of water.

These people are by and large broke. It’s likely to cost more in enforcement
than they’ll get back.

At least the IRS will continue to lack funding so the rich don’t have to pay .

~~~
lgleason
There are things in the works to shift some of the liability for defaulted
student loans back on to the Universities along with some forgiveness programs
attached to these. People who can afford to pay them back should, but the
universities need to be held accountable for spiraling out of control costs
for programs that students often can't pay back because of lack of market
demand for skills and over-priced degrees.

------
exabrial
Student loans need a TILA box: you're taking $100,000 loan for a $30k/year
job. It'll take you 20 years to repay, do you wish to sign?

~~~
mindslight
All the check boxes in the world still can't obtain consent from a child. And
make no mistake - someone about to graduate high school, herded by their
parents and other authorities their entire life, is a child.

It's time to admit the failure of this particular financial engineering
scheme, and close it down. Rather than complaining about the money that has
already been lost, be diligent in preventing whatever government-handout the
industry scammers are cooking up next.

~~~
emmelaich
That's why an actual example with numbers is important, like the other
replier.

Also should add the typical earnings for person with the desired degree, with
history.

There's probably a case to be made that students were conned into unrealistic
loans.

------
crooked-v
I wonder how long until there's a "millenials are killing the student loan
deferment industry" article.

~~~
_asummers
Maybe if they didn't eat so much avocado toast, they'd be able to pay back
their student loans! /s

------
bayareanative
I'm homeless with $9k owed to Betsy DeVos' Navient, not the Federal Govt, went
through bankruptcy and can't get a job with a degree that isn't usable for
reasons other than itself. Seems like another case of the vampires squeezing
the blood of poor to pay for the tax cuts and welfare for the rich. Isn't it
the usual case the weakest members of society are routinely scapegoated when
there's a nationalist, bifurcating upheaval?

------
shmerl
Instead of collecting debts, they should figure out how to make education
free.

~~~
jtbayly
Is this meant to be sarcastic? I suppose it would be possible if you enslaved
those with PHDs and unpaid debt, forcing them to teach at universities
administrated by those enslaved for their debt, built by those enslaved for
their debt.

Pharaoh had a lot of things for “free,” as did the plantation owners in the
US, but the cost of free is pretty much the opposite of free for those who end
up doing the paying. And the cost to society is something I’m pretty sure most
wouldn’t advocate today.

~~~
shmerl
I'm serious. Society can figure out how to make education free, and not put
students in crazy debt for years. If you don't advocate it, you basically
advocate debt profiteering.

~~~
techntoke
Lots of people advocate for abusing others because they benefit from it and
never see any consequences.

------
maxheadroom
> _Collection costs such as processing fees and costs associated with
> potential civil litigation can also be added._

What's to stop this from being abused, as the threshold for "potential civil
litigation" is probably a low and subjective bar, which the poor couldn't
afford to challenge/fight, if they were delinquent anyway...? Also, delinquent
is simply late on payments and not defaulted, yeah? One is far more egregious
than the other, is it not?

------
leereeves
This article leaves important questions unanswered:

It says the amount of money collected on delinquent student loans increased,
but is that due to a policy change or due to tax cuts and improving economic
conditions?

The chart shows an increase in collections every year since 2014, with the
largest increases in collections between 2014 and 2016, so it seems likely
it's just an improving economy.

But if there was a policy change, what changed?

------
musicale
There doesn't seem to be much of a counterbalance to the drastic increases in
tuition and fees, which have outpaced inflation for some 40 years or more.

------
viraptor
> including the cost of placing a loan with a private collection agency

I was under the impression that private collection agencies work on commission
from the amount they recover. Is that not the case?

------
thrower123
I feel badly for the people that got sold college as an aspiration that they
weren't qualified for, and dropped out after a couple of semesters.

I don't feel badly for the 30-somethings I know who racked up expensive
private school loans, bumbled around through "finding themselves", failed
startups, went back to school for more debt, traveled the world, and now are
finding the bill for that irresponsibility coming due.

