Here Comes The Student Loan Bailout
2012 is the year the student loan bubble finally popped. While on one hand the relentlessly rising total Federal student debt crossed $956 billion as of September 30, and was growing at a pace that will have put it over $1 trillion by the end of 2012, the one data point confirming the size, severity and ultimately bursting of this latest debt bubble was the disclosure in late November by the Fed that the percentage of 90+ day delinquent loans soared from under 9% to 11% in one quarter.
Which is why we were not surprised to learn that the Federal government has now delivered yet another bailout program: this time focusing not on banks, or homeowners who bought McMansions and decided to not pay their mortgage, but on those millions of Americans, aged 18 to 80, that are drowning in student debt - debt, incidentally, which has been used to pay for drugs, motorcycles, games, tattoos, not to mention countless iProducts. Which also means that since there is no free lunch, all that will happen is that even more Federal Debt will be tacked on to replace discharged student debt loans, up to the total $1 trillion which will promptly soar far higher as more Americans take advantage of this latest government handout. But when the US will already have $22 trillion in debt this time in four years, who really is counting? After all, "it is only fair" that the taxpayer funded "free for all" bonanza must go on.
The latest debt bailout, not surprisingly is not titled "Yet another taxpayer funded bailout for those who bought things they can't afford on credit" as that would not be very politically prudent, especially for those politicians who still have taxpaying citizens as their voters. Instead, its name is the much more PC: "Pay as You Earn Repayment Plan." Alas, it really should be called the former, because what it does is it incentivizes Americans to borrow even more Federal student loans, well aware that there will now always be a cap on the associated monthly interest payment which will never leave a mark regardless what the full underlying loan notional is. It also provides for full debt discharge should the borrowers end up with cushy Federal jobs - because the one thing the US government needs afford is more debt-saddled government workers.
What is the "Pay as You Earn Repayment Plan"? The WSJ explains:
A new federal program should make it easier for some recent college graduates to keep their student-loan payments manageable.
The new option, known as the "Pay as You Earn Repayment Plan," lets eligible borrowers sharply lower their monthly loan payments and qualify for loan forgiveness quicker than they might otherwise.
"It's a very good safety net for students who borrow too much," says Mark Kantrowitz, publisher of the financial-aid site FinAid.org. "If your debt exceeds your annual income, you will probably benefit."
Pay as You Earn, which took effect on Dec. 21, "is designed to help offset the effects of the recession for student borrowers most likely to take a hit in this tough job market," says Lauren Asher, president of the Institute for College Access and Success, which has pushed for the creation of income-based repayment plans.
Which in the New Normal, means everyone with a student loan will benefit. It also means, that courtesy of knowing this safety net is there, more and more people will take advantage of the government's latest generosity with other taxpayer's money.
What are the terms of this new bailout?
The new program comes at a time when rising student-loan balances—amid a still shaky job market—have weighed heavily on many families.
Typically, federal student loans must be repaid within 10 years. At current interest rates, that can work out to a monthly payment of roughly $300 for a borrower with $26,000 in debt.
Pay as You Earn, by contrast, limits student-loan payments to 10% of "discretionary income" as defined by government formulas. Borrowers who make regular payments could have the remaining unpaid amounts forgiven after 20 years.
So much for student debt being non-dischargeable: borrow hundreds of thousands, but make your monthly payment of a hundred or so bucks, and in 20 years you will be debt free, courtesy of US taxpayers. Actually, scratch that: one doesn't even have to make a payment!
In some cases, borrowers with low incomes could be required to make a zero-dollar payment and would still be considered current on their loan. Monthly payments can increase or decrease each year based on the borrower's income and family size.
For those who think getting full debt forgiveness in 20 years is far too long, why there's a loophole for that too: just go "work" for Uncle Sam:
Borrowers with public-service jobs may qualify for loan forgiveness after just 10 years.
As for eligibility "constraints":
To be eligible for the program, borrowers must have taken out their first federal student loan after Sept. 30, 2007, and received at least one federal student loan after Sept. 30, 2011. Borrowers also must meet eligibility cutoffs based on the size of their debt, their discretionary income and family size.
The U.S. Department of Education's Pay As You Earn calculator, available at studentaid.gov, can help you determine if you qualify. Borrowers can apply for the program online or by contacting the loan servicer that collects their payments on behalf of the federal government.
In other words, virtually all people who were responsible for the diagonal take off in the Federal student loan total in the current depression are now eligible for what will eventually be full debt discharge.
So let's get this straight:
- go to some "everyone who applies is admitted" community college
- take on the biggest Federal loan one can get
- use the proceeds for everything besides the tuition (of course)
- be unable to find a job after graduation (naturally)
- plead poverty, accusing evil employers who don't hire those who majored in Foosball, and make "zero" payments while remaining in "compliance"
- get a job working for the government, wait ten years, and have the entire loan magically disappear.
And there it is: incentives for the common, and very much broke, man in the New Normal.
If there is anyone out there who thinks this will not result in a "charge it" feeding frenzy and that the Federal student loan total will not go absolutely parabolic going forward, please raise your hand.
Of course, what is not discussed, is who is on the other side of all those forgiven loans. And the answer, dear taxpaying US readers, is starting at you in the mirror. Because all the Federal government will do is transfer the unfunded obligation, which has already been used to satisfy the purchase of goods and services, from one individual to the whole group.
But when one is dealing with the government of a country that is no longer even fit to be defined as "banana", what is adding one more trillion between already insolvent counterparties.
Finally, yes, this means the Fed just tacked on one more year of QE to its $1 trillion/year in US debt monetization, which also means the Fed's balance sheet will now also be used for to fund student loan forgiveness, among so many other things.
Insolvent students of the world, unite!
(65 votes)
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Tell us about your father, Jobe ?
That's assuming he knows who it was who got his mother pregnant. Could explain a lot of his animosity if he does not know who did the deed.
But no excuse for projecting his issues in ZH.
....could it have been the impregnator was.........satan?
Which one?
Kudos to you mate, both for allowing your daughter to make her own way AND for not getting really stuck into this piece of shit who has slandered your daughter.
If it was me, I would have jumped through his (safety) screen and ripped his fucking arms off ... in any case I'll see if I can get the bastard booted, because his attack is way beyond the pale.
Thanks for the great laugh Setarcos! I've been keeping mr miffed busy this evening so he wouldn't see that post 'cause that would pretty much sum up his reaction. God knows what legislation Obama would come up with to prevent crazed computer programmer fathers virtually ripping of the arms of some jerk forum poster. I alway thought nerds were shy and gentle. However mine has a farming background. He can gut someone like a fish virtually and physically!
Miffed:-)
Dude, this is over the top. I'm an engineer, but even I recognize that it's not for everyone. In fact, really only a small percentage of the population is cut out to be engineers, and that's not to put us above or below any other profession. It's just one of many labor specializations. In fact, one of the problems I see in Asia and India is people becoming engineers who are completely unsuited for it. It's a case where economic incentives draw people into a profession for monetary purposes, not because of any particular talent in or proclivity towards practical problem-solving, the central aim of engineering.
Contrary to what you might believe, most women are not prostitutes, nor do we wish to become prostitutes. I tend to focus more on the other side of that trade, the men who are so lame that they are reduced to paying for sex.
+100 on not all people being cut out for engineering, or STEM for that matter. My wife's parents pushed her a lot to get a statistics major, she hated it, and is much happier now that she's studying dietetics. She's helping her family a lot with their health too. Unfortunately, the diet-and-exercise program she's found that helps obese people tremendously is also outlawed in her profession (as in losing one's RD), so I'm not sure how we're going to handle that one.
outlawed? doesn't surprise me, but damn...
In so many words, if you go against official dietary recommendations for a given situation, and it gets out that you are doing this, then you are at risk for lawsuits and potentially having your credentials revoked. It's not the only area that this happens: Read The Real Crash:America's Coming Bankruptcy by Peter Schiff for examples of how investment advisors and broker-dealers are also pushed into recommending pre-determined vehicles.
Thanks Mike. I wish I had the social skills Miffed's daughter has. It sort of seems like a "the grass is always greener on the other side" kind of problem. I wouldn't say I'm anti-social, but I have been around folks who have a knack for "people skills" enough to realize that's not my forte.
I've always been a believer in the idea that everyone has something that they are especially good at, the trick is figuring out what that is.
Your comment is disgusting and one of few in ZH which would richly deserve being "kicked to the bleachers" and deleted. And judging by your semi-literacy you'd never cut it as an engineering student, nor any other calling requiring requiring intelligence, including those you disparage.
Amen Setarcos - it was utterly tasteless - poor Jobe needs to get out of his parent's basement more often. The restraint in the responses above, including yours, is admirable.
BTW - stay away from the kcolmeh, Brother.
kcolmeh??
Ah, I Googled and found "bottomcumadict", apparently to do with homosexuals.
Well live and let live, I usually think, but not when kcolmeh pollutes ZH with hateful and slanderous attacks on someones daughter.
An historical reference to your screen name. Maybe I should have put it in the form of a question? And it applies to Jobe too in this case - a poison weed.
My screen name is Socrates spelled backwards, because I admire him, but cannot come close to his brilliance via Plato.
I'll check on who else might have used my screen name.
And "Kcolmeh" is Hemlock spelled backwards - it is a nasty drink. Should have been more obvious maybe? Thanks for your efforts to uphold the standards here today.
Ah! Got it. Well the likes of this particular poisonous specimen of our species won't kill me.
I agree with the Chinese assessment. You have a gutsy daughter. If she can play the game in China, she'll probably do just fine.
Amerika actually started to die a long time ago, but the process was so slow that few noticed. And we didn't have a developed internet and sites like zerohedge to share ideas.
I'm not saying Amerika isn't an amazing place. And indeed at one time it was truly a grand country, one of the best if not the best on the planet.
But it's over now, it's finished. There are consequences to what is being done. If you enslave young people to pay for bank bailouts and welfare and then you are finished as a society.
Because a society that doesn't rear children and prepare them to continue the cultural traditions into the future is going to die out. This is true throughout history.
I'm in my early 30's and feel fortunate that I was able to get what I could from the system. Nowadays I concentrate on preparing for what I know lies ahead. I've learned the hard way that what Amerika wants from me is my labor and my money. I must "work hard and play hard", keep on earning and consuming, bankrupt myself and leave a hollow shell of a human body left, to keep the Ponzi going.
So I personally have decided not to give either to them. They will not get my labor nor my savings. Fuck 'em.
Yeap. How amy folks have stpeed outside the same zip code and lived outside to see what and how things are. I guess the tree is now complete and the blodd lines are thinning meaning incestuous.
now I'll enroll in a 4 year private school getting a LGBT degree and then a sweet job for the feds, 100k to start with student loan thrown away, just think of all the free vacations, st barths, first class trips to europe, asia
This is a look at how the left operates. Apparently the out of control costs of medicine and hospitalization was something that the country could not stand and needed our immediate attention. Thus Obamacare.
Yet the educational system has largely had at least the same amount of price rise if not more and no one suggests anything be done with those costs. Except bailout the students and their loans. You can bet Obama certainly will not lead the charge in that reformation.
The Kenyan is the problem if ya have not figured it out. 6 trillion in new debt in four years. US credit rating downgrades will continue and he does not care. This is shameful at the very least and in my opinion is approaching treason.
"The Kenyan is the problem...."
I agree, dear poster, but we should really blame.......The PuppetMaster!
This is nothing but a crock of shit. This will distort the market further in so many ways....excess borrowers clammoring for more debt, institutions (aka the cartel) raising the cost of education even further. This just goes on ad nausium.
Perhaps the only benefit here will be that it will accelerate the coming end game...other than that this is just another POS.
Help us Obi Wan Kenobi, you’re our only hope.
F%^k it. Buy gold and hide it where the government can’t see it or find it. That’s your only hope for hanging onto what you’ve got.
Only suckers (like me!) pay back their student loan. I took a second job and ate spaghetti and sardines (the cheap brands) for a couple of years and paid back in full.
What a sucker I was!
Now I am being forced to pay other people's student loans thru taxes.
Seems unfair.
You've been very generous .... time to rethink the cheap bastard handle ?
Yeah, things have changed a lot since 1960.
Imagine paying $100,000 for a 4-year degree at a STATE UNIVERSITY graduating with an engineering degree....and ending up at Best Buy as a stocker (if you're lucky).
Try paying back $100K on $9/hr with those sardines.
Is that my fault?
Do you think it is ok for you to take money from me to pay back your loans?
It's OUR fault for letting this get out of control because we had 'better things to do.'
It's OUR money they're taking away to pay those loans because we haven't stopped them, still having 'better things to do.'
Bitching is nice, but it doesn't get your milk money back.
How does my money become "our" money?
Oh yeah. You must have voted for the kenyan
Sorry. I was thinking you meant taxes that we all pay. Apparently you're talking about a more personal experience, such as a mugging or losing your wallet.
"Is it my fault?"
That's not the discussion.
The discussion is whether one can pay back their college education costs from a loan.
And unless you're wealthy (considering median wage in the US is around $26K/yr) the answer is absolutely NO.
The education bubble is exactly like the housing bubble. If you wanted a house, you HAD to get an outrageous mortgage, but at least you had a house that at the time was only going up in value.
If you want to succeed in America, you need an education. So you HAVE to finance it somehow. A 4-year school even commuting is going to be around $50K.
You can buy one house or more for what an education costs. It's a joke.
The idiot writing this article blames homeowners and 18 year old students.
I blame the greedy banks running this country that are the sole benefitiaries of both these crisis. How can you not?
You are avoiding the real issue.
You think it is justified to take money from me to pay off your loans
Everyone who blames the borrowers should ask where the lenders are in all this. Traditionally, ppl who lend out money do due diligence. I once actually thought if I wanted an educational loan I would have to go into someone's office and explain my plan for paying back the money. Dumb me. Turns out if you get accepted into a program, any program, you just borrow as much as the school says it costs.
When you're lending money like that, you deserve to lose it all. Aren't the banks supposed to be the professionals able to discern credit risk with like, excel models and calculus and shit?
Taxpayers who don't like it should demand their government stop flushing money down the toilet. Because few if any 18 year olds could fathom that the system could be so Fing corrupt or stupid as to hand out this money if they have a slim prospect of paying it back.
A loan is an investment. Sometimes investments don't pay off. It's a lesson borrowers and lenders should learn together. If lenders keep enjoying consequence-free full-retard lending, capital missallocation will continue.
This has little to do with traditional lending .... it's all about keeping the ponzi economy going .... keeping goods and services flowing .... because a complete stall is now past unacceptable .... it's pedal to the metal .... until we all go over the cliff .... there is no turning back .... especially with the monster consumers zero producers we've created ... this is not going to go well !
And so it is complete
The young will 4ever vote for The Democrats
The slave and the slave owner. Servitude and the served. Debtors and the Master. etc.
"that are drowning in student debt - debt, incidentally, which has been used to pay for drugs, motorcycles, games, tattoos, not to mention countless iProducts."
Not to mention hyper-bloated tuition fees paid to third rate colleges for providing a worthless college diploma.
"homeowners who bought McMansions and decided to not pay their mortgage"
"student loans that just bought toys"
Yeah, that's how it is. I mean let's forget the millions of people that lost their jobs and got stuck with a mortgage that was 50% more than the house was worth.
Let's forget that people were given untenable loans by shiftless banks and told "real estate never goes down".
And yeah, all student loans are kids just trying to have a party. I mean no one goes to college to get an education?
Who runs ZH? You sure pick some fucking dumb assholes to post shit on here.
I just picture some angry old veteran getting Vet bennies and social security writing this shit. He's mad that the youngins ain't pulling their weight.
Or maybe it's some rich dooshbag that sits around all day gambling on Wall Street, mad at people trying to get an education. Or people trying to afford a home.
Some ZH is tolerable, but man, there are some real dooshbags that post shit on here that just seem like old men yelling at the clouds.
And let's remember that the parents knew they were getting something for nothing when lil precious sprog took money for nothing from the taxpayers...everyone else.
Genuinely poor people deserved loans when their children proved capable to go to college. It is the rest who knowingly took taxpayer money, even though they could afford to pay for their child to go to college. It is the rest employed by colleges who knew they were ramping up prices and their wages because the government guaranteed a fresh supply of fodder.
Only government jobs are stress free. Everyone else pays for them, with their blood, sweat and tears.
By the way in words that your sort understand: fuck off, ignoranti, debt slave of useless politics.
My friend talks with his/her friend (a woman) in CA almost daily. The woman's daughter in law recently inherited between $150k-200k. So her and her husband are soon starting their Section 8 rental, with you and me subsidizing $550/mo of her rent.
This student loan debt forgiveness is little different from my relatives in San Francisco writing off their income tax about $15k/year in interest payments for their dog poop $750k condo, about 1200cf.
Theft - taking something that is not earned from someone else - is wrong.
Kalifornication is a prime example of what went wrong with the Republic.
And tell your Feinstein freak that her concealed gun which she admits does show her to be a freak hypocrite when she visits her profiteer husband who keeps her in the style to which she has become accustomed, due him trading off her insider knowledge and her fucking anything or anyone that profits her including the taxpayers she exploits and wants to disarm.
Typical democrap fascist.
No wonder she carries a concealed weapon, and has bodyguards. She fears lamp posts; a short rope and a long drop, due to her venality.
WTF are you talking about? I live in Calif. There are stiff penalties for anyone who falsifies records - To receive a grocery bag of various food items you must submit:
1. Last 3 checking account statements.
2. Last 3 tax returns
3. Telephone bill and 2 utility bills with your name/recent.
4. Driver's license.
The very low-income threshold uses 50 percent of median income as its limit. If a household's combined income is greater than 50 percent of its area's median, it cannot obtain Section 8 assistance. In San Francisco, 2010 HUD data shows that $48,400 equals 50 percent of the city's median income for a three-person household. In Redding, that figure is $25,350. Simply put, three-person renter households need to earn $48,400 or less in San Francisco, or $25,350 or less in Redding, to qualify for Section 8 housing.
PreferencesHousing authorities must provide 75 percent of their Section 8 vouchers to families who take in less than 30 percent of their area's median income, the HUD housing choice vouchers website states. Some authorities choose to use other preferences -- some related to income, some not. For example, HUD notes that common Section 8 preferences include expediting voucher availability for households that commit more than half of their income to housing, for displaced persons and for those who live in low-quality housing.
Caught committing fraud can result in repayment of all monies, fine, inability to access program in future.
This author failed to consider the following:
1. Tax-payers have no money
2. Student loans were created from dust and to dust it must return
3. Without these loans, how can the kids afford the I-things
Anyway, i just used my refund check to buy more gold
Enticing children into colleges and lumbering them with debt is a useful way to keep down unemployment figures, profit banks and slave master politicians who want to keep their jobs by keeping everyone else beholden to them.
Offering loans to students is a useful way to enslave them, and their parents.
Cynical powerbrokers take tax money, bribe politicians, and serve foreign interests...not the Constitution.
My father went to school in a horse cart to a one room school house in Maine, and then he became one of the world's most influential engineers, changing medicine for good. He was not lumbered with debt, and nor were his family.
Debt is slavery. Genuine community is all.
Genuine community will return. It never went away. The slave masters fear for their fate, and that is why they want to usurp the Constitution, disarm the people, and make tax slaves of all...with the help of their lazy pets in the colleges, professors of communism.
Those people grift off taxes and send their own children to private schools with armed guards, surround themselves with armed body guards...and employ teachers to tell children that Big Brother loves them.
See Sandy Hook as an example that Big Brother state hates you, and uses any of its failures as an excuse to disarm you.
The alleged shooter was drugged up, and his mother worked for the CIA. Gun crime has risen with the use of drugs, legal and illegal.
Children are the most at risk when adults succumb to Big Brother state lies.
Edit: and teachers in the school said they saw two shadows outside the school running away. The police arrested two other men. Eye witnesses saw this. No mention of this since then in the politically controlled main scream media.
The mother of the alleged shooter worked for the CIA, and Adam Lanza was on psychotropic drugs. Drugs legal and illegal are the problem that causes mass shootings, but main scream media prefers the excuses of politicians and banks who make most money from drug running lobbyists.
loan fogiveness is the future you don't like it tuff
Loan forgiveness happened for the major banks with the help of tax dodging politicians.
You've been had, duped, cheated. You like that, apparently. You voted for it.
The biggest welfare recipients are the biggest banks and their political pals in Washington DC.
Paid with taxpayer money, and the unemployed as a result.
They exploit you, Mr Gullible.
Such *ssholes.
What I would not mind seeing is the Fed give all outstanding Federal student loans a reduced rate say 3%. Why not since banks are borrowing at about 0%.
If I can refi my mortgage to 3.25% why can't the Fed effectively do the same for student loans.
Lowering the interest rate to reflect current market conditions makes some sense. Forgiving loans is b.s.