New Student Loan Rules

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New Student Loan Rules

Postby GeeBee » Fri Oct 28, 2011 3:16 pm

If the AP has it right, and I'm correctly understanding what I'm reading (two questionable assumptions), then a lot of student loan money never has to be paid back.

http://www.google.com/hostednews/ap/art ... 24bc9edf02

So a person takes out, say, $100k in student loans, then graduates with a degree in a field which has no job prospects. He goes to work as a bartender, or whatever. The normal monthly loan payment on $100k over 10 years would be $1,000, but under the new rules he only has to pay 10% of his discretionary income... let's say $50/month. Maybe after a while he gets a better job, so lets say over the next 20 years his average payment is $100/month.

So at the end of 20 years, he's paid back $24,000. That doesn't even cover the interest on $100k. At the end of 20 years, the remaining debt is forgiven -- wiped out.

So who pays? How can the Obama administration say with a straight face that this new rule isn't going to cost the taxpayers anything?
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Re: New Student Loan Rules

Postby SteveFoerster » Sat Oct 29, 2011 12:10 pm

I just got this vision of someone saying, "I'll work as a janitor for twenty years! That'll show 'em!"

But I agree with you. At that point the federal student loan system openly becomes a big fat subsidy for colleges and universities.
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Re: New Student Loan Rules

Postby GeeBee » Mon Oct 31, 2011 1:55 pm

SteveFoerster wrote:I just got this vision of someone saying, "I'll work as a janitor for twenty years! That'll show 'em!"

But I agree with you. At that point the federal student loan system openly becomes a big fat subsidy for colleges and universities.


I thought of that as I was writing the original post, too. But it was already kind of long-winded, so I didn't digress.

No, I'm not suggesting that anyone would do that. But someone contemplating a degree in, say, Art History may not stop to consider the job prospects in that field. These new rules will make it even less likely that students will consider the costs/benefits of their degree program, since the amount they have to pay back on the loans will be relatively painless and completely disconnected from the amount of the student loans.

One of the reasons healthcare costs are spiraling out of control is the disconnect between receiving services and paying for them.
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Re: New Student Loan Rules

Postby canonrock » Sun Mar 24, 2013 6:59 am

Good news!
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