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Unintended Consequences Of Obama's Student Loan Policies

Tyler Durden's picture




 

Submitted by F.F.Wiley of Cyniconomics blog,

So this week, ...

His new policies on student loans include greater access to both payment reductions and loan forgiveness.

And, needless to say, his Rose Garden speech oozed election year politics.

As the Boston Herald put it: “This is nothing more than politics as official policy … the president’s shout-out to U.S. Rep. John Tierney, a vulnerable Democrat, at yesterday’s White House ceremony was just one of the clues.”

To be clear, student debt has become a huge problem that demands attention. Alongside other challenges, such as finding a decent job in a stagnant economy, student borrowers face daunting payment burdens that they’re failing to meet at record rates.

But the problem requires more than just a political instinct to bail out a wide swath of the voting public.

In a better world, policymakers would take a cold, hard look at the effects of federally-funded student loan programs, including the good and the bad. Here are a few such observations that you’re unlikely to hear from your president:

 

1)  Student loans are a fiscal time bomb, notwithstanding the government’s ridiculously flawed cost estimates, which Obama chose not to update despite this week’s policy changes. Official cost estimates ignore the near certainty of continued bailouts, while relying on shoddy accounting practices that you wouldn’t get away with in the private sector. In an editorial published after Obama’s latest announcements, the Wall Street Journal wrote:

Democrats claim to care about inequality, but kids who don’t go to college are in even worse economic shape than college kids, with even higher unemployment rates. Yet when the cost of defaults and debt forgiveness finally comes due, it will be paid by all taxpayers, including those who didn’t go to college. So the townies with jobs will end up paying more in taxes to give former college kids and grad students a break on their student debt.

2)  Skyrocketing college tuition costs are explained partly by extensive public subsidies to higher education, including past enhancements to federal student loan programs that all but eliminated private lenders. Ample government support allows universities the kind of pricing power that other industries only dream of. Obama characteristically framed his preferred policies as a choice between “lower tax bills for millionaires or lower student loan bills for the middle class.” To see the absurdity in this bit of rhetoric, you only need to look up the generous incomes and perks enjoyed by administrators and senior faculty at your local university. Arnold Kling put it this way:

The right way to think about student loans is that they are a gift from taxpayers to the higher education industry, both non-profit and for-profit. Most of the benefit goes to those who work in that industry, not to students. Most of the risk is borne by students and taxpayers, not by those who work in the industry.

3)  Public support for higher education helps to create unnecessary barriers in many fields where advanced degrees are now required credentials. Economics – a frequent topic for this blog – is just one example of a profession where “entry” requires indoctrination in methods that are useless if your goal is to actually understand your subject (rather than maximizing your publication count). Neal McCluskey argues that “cheap college has almost certainly fueled credential inflation, not major increases in knowledge or skills.”

4)  McCluskey’s position is supported by a recent study showing that borrowing for graduate school explains much of the increase in student loan issuance since 2004. The WSJ attributes the surge in graduate school loans partly to “an open spigot of government credit,” while quoting the study’s author, Jason Delisle:

Graduate schools have essentially found a way to capture more of someone’s future income and future spending than what would probably occur if we had some sort of underwriting standards and loan limits.

5)  Data shows that substantial portions of student loan proceeds are used for rent, bills and lifestyle expenses for borrowers with questionable ability to meet repayment obligations. Some of these “students” appear to have little intention of actually putting in the class and study time to obtain a degree. Again from the WSJ: “Even when schools suspect students are over-borrowing, they are restricted by federal law and Education Department policy from denying funds.”

6)  Moreover, reckless decisions about how much to borrow are not only enabled but encouraged by government policies. Back to McCluskey:

In the name of helping them, federal politicians, and many other people, massively oversell higher education to the detriment of students. Perhaps as much as half of people who enter college don’t finisha third of people with a bachelor’s degree are in jobs not requiring the credential [and]; underemployment is even worse for graduate-degree holders…

7)  Special provisions for public sector employees, who can achieve loan forgiveness after only 10 repayment years compared to 20 for those in the private sector, are arguably the most heinous of all student loan policies. They are the political equivalent of a flagrant foul on the producing classes. Those who choose to put their efforts to the test of the market are penalized, to the benefit of public “servants” who live comfortably off the taxpayer without any accountability to the market. Such public sector perks can only be explained by the hubris, sense of entitlement and government-run-amok cronyism of the political class.

. . .

Now, none of our observations and editorial comments are meant to deny that there are many student loan success stories.

We’ve deliberately focused on the risks of federally-funded student loan programs, as these are too often swept under the carpet.

Problems with student loan programs are deep-rooted – thanks mostly to the government’s domination of the market – and were only worsened by Obama’s actions this week.

 

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Fri, 06/13/2014 - 13:06 | 4853793 simplejack
simplejack's picture

 

 

 

why do the government and big companies always want people to take on more debt?

Fri, 06/13/2014 - 13:12 | 4853828 nuclearsquid
nuclearsquid's picture

You're new.  Give it a few more days of reading and you will understand.

 

Fri, 06/13/2014 - 13:16 | 4853862 simplejack
simplejack's picture

 

 

why does the government always bail out the companies that have created too much bad debt?  

 

Shouldn't those companies go bankrupt?

 

isn't transfering bad company debt to the government balance sheet called......  socialism?

 

or is it facsism?

 

 

Fri, 06/13/2014 - 13:17 | 4853866 0b1knob
0b1knob's picture

< Intended.

< Unintended.

Fri, 06/13/2014 - 13:35 | 4854000 Moski
Moski's picture

Declaring lack of intent on another's part is an assertion impossible to prove yet it's done repeatedly.

 

I find it vexing.

Fri, 06/13/2014 - 14:22 | 4854240 Save_America1st
Save_America1st's picture

who in the hell thinks any of this shit is "unintended"???  This is exacly and explicitely fucking intended.  They're crashing the system.  It's the Cloward and Piven strategy, and it's exactly what Saul Alinsky and Bill Ayers taught obama was the way to collapse America in order to take it over.  The fucking Marxists have been trying to collapse America from within for over 100 years. 

Unintended???  Grow the fuck up if you think any of the shit that's going on with the monetary system, the border insurgency, the record high unemployment and welfare, etc. etc. etc. is "unintended".  Bullshit.  It's all part of the fucking plan, bitchez.

Got supplies?  Got extra water filtration, food storage, lead/copper and lead delivery systems, power supplies, medical supplies, camping, hunting, fishing supplies?  Extra cash outside of the banking system and a stack of PM's???  A bug-out and defense plan?

If not, then you better start gettin' to it now, because absolutely NONE of any of this is going to get turned around and fixed before it all collapses.  Sorry, but there's just too much being thrown into the system at this point.  Even if one thing is turned around it's still too late and we're going to collapse under the weight of everything else. 

Unless the military and the civilian population absolutely takes D.C. out and the Fed Reserve.  Arrests all the criminal politicians and banksters and forces an end to all this shit.  Then if that actually happened and we installed a Constitutional government who would run things properly we'd still be facing a collapse economically because there's no fucking way to get out from under this debt and the derivatives that will force interest rates higher and a total default.

All this shit has to happen eventually...there's no way to stop it and no way around it.  Kicking the can won't last for much longer so either way we are going to collapse. 

The thing is to be preparing for it and to make sure the good guys take power and control over the recovery after the collapse.  We can't let the bad guys solidify their power and control over what's left after the collapse or we're all done for.  It'll look like Syria and Iraq in all our major cities.

We need to take over the government by force if necessary with the good guys in our military forces.  We need to put all the government on trial for treason and make serious examples out of many of them.  Yes I mean hangings or life in prison.  Same with the banksters and the Fed.  It all has to be stopped like that and we have to take over immediately so that we control as much of the outcome as possible across the nation and provide security to fight the chaos that will most definitely occur.

It might take several years to fight this out and get things back on track.  But if it's not done this way then ultimately the bad guys will control whatever happens after the collapse.  And that means FEMA camps, executions by the multiple millions (See Larry Grathwohl video here), foreign Mercs and U.N. troops occupying our streets just like out of Red Dawn, because they will need foreigners when our military refuses to support the takeover.  Totaly violent tyranny Soviet Union style.

Can't allow that to happen on American soil folks. 

Fri, 06/13/2014 - 14:32 | 4854291 TVP
TVP's picture

Thanks for that tome of a comment.

While I admire your will to fight, and your patriotism, this takeover will be different.

Tyrants have learned that the resistance often fights with such ferocity that they will overwhelm the government.  The solution?  Take out all resistance BEFOREHAND.  

Anyone and everyone who can resist will be labeled a "terrorist sympathizer", disarmed, rounded up and put into FEMA camps right about the time that the lights go out (EMP or cyber-attack).  

Don't underestimate how long this can drag out, either...they can keep the ponzi running for years and years.  Unless this whole China re-hypothication thing turns out to be real, and there's no way to paper over it. 

But the bankers always find a way to paper-over things and cover them up.  The ability to print infinite currency grants a power no one should have.

Fri, 06/13/2014 - 14:40 | 4854327 0b1knob
0b1knob's picture

200 American contractors surrounded and fighting for their lives at Balad airfield.  Iraqis dropped their weapons and ran when the Taliban showed up.

http://www.wnd.com/2014/06/200-u-s-contractors-surrounded-by-jihadists-i...

Obama does nothing.   Based on the Bergdahl exchange they should get 1000 Taliban released and $500 million ransom for them.  

Unintended?

 

Fri, 06/13/2014 - 15:41 | 4854586 RafterManFMJ
RafterManFMJ's picture

You bought the ticket.

Now take the ride.

Sat, 06/14/2014 - 02:04 | 4855992 Radical Marijuana
Radical Marijuana's picture

well, "save_American1st," you sort of blame the "fucking Marxists." It ain't the Marxists, it is the banksters who funded messianic Marxism to become a significant social movement, who are also using false labels like "socialism" to conceal what is actually going on, which are systems of lies, backed by violence, thereby transferring "ownership" to smaller and smaller minorities, which is actually the diametrical opposite to the stated goals of messianic Marxism, or socialism.

You appear to be a glorious day dreamer: "We need to put all the government on trial for treason and make serious examples out of many of them.  Yes I mean hangings or life in prison.  Same with the banksters and the Fed." No doubt you are right about the facts that the government of the USA has become almost totally treasonous, and the main causes have been the banksters, however, you do not seem to be honest with yourself enough to admit you are merely day dreaming.

Tragically, I think that the links to this guy tend to predict the more probable dismal futures for "America" being gradually ground down, at a faster and faster rate towards the end:

HTTP://WWW.YOUTUBE.COM/WEPOLLOCK

In his comment about his video about "young revolutionaries" and "young counterrevolutionaries" Pollock stated, "Generally, there will not be a revolution or counter revolution in the US; the more likely outcomes include breakdown, break-apart and collapse.?"

That is what I am expecting too. Anything else would take a series of technological and political miracles.

So sorry, but I think that the "America" you want to save is so terminally sick that it is already practically dead. The about 1% that are somewhat aware of those social facts and are attempting to prepare are outnumbered 100 to 1 by those who are still too clueless to be aware of how clueless they are.

I guess I sort of nostalgically wish that I could still share in as much of the irrational hopes that you still appear to be able to hold on to. However, IF I was a young person today, I would be attempting to maximize my student loans, to enjoy life while I could, because I would not have any hope for the future.

Fri, 06/13/2014 - 13:52 | 4854092 JRobby
JRobby's picture

Intend Obsolescence Built Into The System

J Cantrell

Fri, 06/13/2014 - 13:26 | 4853941 Eddy Vluggen
Eddy Vluggen's picture

..or is it communism?

Perhaps you should by a dictionary before throwing words you don't understand. Throwing money after something that's bankrupt isn't part of ANY political ideology.

Brilliant how so many people are convinced that socialism is evil, without being able to explain why.

Fri, 06/13/2014 - 13:33 | 4853991 simplejack
simplejack's picture

 

 

does it matter which 'ism' it is when the real problem is mis alocated capital?

 

why would anyone want a system that favors the mis alocation of real working capital?

Fri, 06/13/2014 - 14:15 | 4854217 Eddy Vluggen
Eddy Vluggen's picture

Yes, great argumentation.

<grabs coat>

Fri, 06/13/2014 - 13:40 | 4854005 lordylord
lordylord's picture

Re Eddy Vluggen

There is nothing wrong with voluntary socialism.  The trouble is that all socialist systems throughout history has required that a gun be pointed at the producers for the benefit of the takers.  The major takers being government, elite bankers, and the well-connected.  Meanwhile the producers and those dependent on goverment starve to death.  Great system, huh.

Brilliant how so many people are convinced that socialism is beneficial, without being able to look at history or use common sense.

Fri, 06/13/2014 - 14:13 | 4854207 Eddy Vluggen
Eddy Vluggen's picture

There is nothing wrong with voluntary socialism.

Look up the word "social". It has nothing to do with the redistribution of wealth.

Fri, 06/13/2014 - 14:33 | 4854302 TVP
TVP's picture

Look up the word "troll". 

I believe your username appears as an example.  

Fri, 06/13/2014 - 14:41 | 4854344 Eddy Vluggen
Eddy Vluggen's picture

Whoaah; not even trying to reach for arguments, just straight ad-hominem :D

Fri, 06/13/2014 - 13:38 | 4854010 Anusocracy
Anusocracy's picture

Because socialists, like fascists, don't have a concept of other people's property.

Like animals in nature.

Fri, 06/13/2014 - 13:42 | 4854037 lordylord
lordylord's picture

"Like animals in nature."

Even animals respect each other's territory.  Socialists are less than animals.

Fri, 06/13/2014 - 14:25 | 4854267 Eddy Vluggen
Eddy Vluggen's picture

Socialists are less than animals.

..and there goes I thinking all humans are equals and brothers, since they're stuck on the same ball o' mud. Does this mean that I no longer have to behave human?

 

Yes?

Fri, 06/13/2014 - 21:21 | 4855542 Anusocracy
Anusocracy's picture

If, as you state, you "have to behave human", then you're not human.

You're a domesticated animal.

Fri, 06/13/2014 - 14:23 | 4854259 Eddy Vluggen
Eddy Vluggen's picture

You're confused with communism; which does respect property.

Fri, 06/13/2014 - 21:15 | 4855533 Anusocracy
Anusocracy's picture

Not an individual's.

Just the property of the humant colony.

Fri, 06/13/2014 - 13:43 | 4854050 Moski
Moski's picture

It's evil because it does not respect individual rights, especially the right to property, without which rights are meaningless.  If you can't keep what you've earned it means someone has a claim on every berry you pick or fish you catch.  That claim is the evil lie.  That is Evil.

Fri, 06/13/2014 - 14:18 | 4854233 Eddy Vluggen
Eddy Vluggen's picture

"It's evil because it does not respect individual rights"

..where does it say that it does not respect individual rights? Have you ever been to Amsterdam?

 

It was SOCIAL.

 

Have you ever compared different forms of state? Can you actually tell the difference between a communism, fascism and socialism?

 

It is easy to mislead idiots. Education is the only defense.

Fri, 06/13/2014 - 17:51 | 4855025 Blues Traveler
Blues Traveler's picture

Ed, Dont be a daft punk, or least not in the octagon of minds of critical thinking people.  Anything that deviates from putting the rights/liberties/freedom/property rights/pursuit of happiness of the individual ahead of the people or government, then it falls into one of the "ism'. 

 Take your points/discussion to its repeated historical proven failed conclusion, then you will find us.

 

Fri, 06/13/2014 - 13:58 | 4854113 SeattleBruce
SeattleBruce's picture

"Throwing money after something that's bankrupt isn't part of ANY political ideology...Brilliant how so many people are convinced that socialism is evil, without being able to explain why."

As we know, political cover is purchased and given to TPTB.  But frankly communism, as generally applied in this world has been and is evil.  But so are the two political parties in the US that give cover to the MIC as SOP, just not as directly evil as genocide, imo.  Promoting war, for national, corporate and personal economic gain though is still pretty evil, imho, and when it becomes institutionalized, and part of national economy and policy to the point where it CANNOT be questioned, all the moreso.  While we're not engaged in ethnic cleansing or genocide like Stalin and Pol Pot, et al were, we have done plenty of unnecessary, institutionally sanctioned killing/war simply because it 'seemed' to be in the national (economic) interest.  This is most definitely a BAD reason to conduct war (if there are ever good reasons (just war discussion)).

Fri, 06/13/2014 - 14:32 | 4854292 sessinpo
sessinpo's picture

Eddy Vluggen    ..or is it communism?

Perhaps you should by a dictionary before throwing words you don't understand. Throwing money after something that's bankrupt isn't part of ANY political ideology.

Brilliant how so many people are convinced that socialism is evil, without being able to explain why.

---

A fine example of that you just made.

Sat, 06/14/2014 - 05:14 | 4856104 StychoKiller
StychoKiller's picture

Try to read "The Fatal Conceit", mathematics don't lie, politicians do!

Fri, 06/13/2014 - 15:18 | 4854504 armageddon addahere
armageddon addahere's picture

National Socialism = Fascism

International Socialism = Communism

Fri, 06/13/2014 - 13:12 | 4853829 nuclearsquid
nuclearsquid's picture

You're new.  Give it a few more days of reading and you will understand.

 

Fri, 06/13/2014 - 13:14 | 4853830 nuclearsquid
nuclearsquid's picture

You're new.  Give it a few more days of reading and you will understand.

-wow- either zerohedge really liked my comment, or the NSA is trolling hard today.

 

Fri, 06/13/2014 - 13:23 | 4853911 pods
pods's picture

Just a tri-burst, no worries.

pods

Fri, 06/13/2014 - 13:46 | 4854066 tempo
tempo's picture

My grandson finished 2 years of pot smoking and sexing at a major University taking minimum courses and has no declared major. He is working 15 hours/week this summer at a city sports camp at minimum wage. He is calling all relatives and friends asking for co-signers so he can continue his "passions" and dreams (pot smoking, sexing and not working). Anyone interested?

Fri, 06/13/2014 - 15:45 | 4854604 RafterManFMJ
RafterManFMJ's picture

LOL

Spoke with a gent at work a few weeks ago...he is co-signing for his daughter's schooling...for a 6 or 7 year degree in Pharmacy.  He could tell by my expression what I thought of the idea, and my mind reeled as I strained to find something positive to say. Finally I came up with, "Well, that's a real degree and there should be some demand for it."

Last week he clocked 108 hours at work.

Fri, 06/13/2014 - 17:02 | 4854856 world_debt_slave
world_debt_slave's picture

debt slaves

Fri, 06/13/2014 - 13:38 | 4853807 Itchy and Scratchy
Itchy and Scratchy's picture

evrybuddy shud b able to git a subsadized Libral Arts edjacshun jus like me sew they no the bess place where to git their food stamps an disabilty forms an EBT iTunes cards if dey knead dum

Fri, 06/13/2014 - 15:52 | 4854617 RafterManFMJ
RafterManFMJ's picture

This guy was a virtuel classmate of mine! How have ben you Itchie? Find work yet? Scene that new truke you bot with the 96 month loan! Sweeeet! You goin to the virtuel Univercity of PHoenicks reonion on sepember 19? Ill see youre avatar thier I huppe!

Fri, 06/13/2014 - 13:10 | 4853816 Puncher75
Puncher75's picture

Obama is an Alinskiite!  Overwhelm the system on ALL fronts and create a Socialist "utopia" from the ruins.  This is who this ASSHOLE idiot is!!  Cloward and Piven.  Wake the eff up!!

Fri, 06/13/2014 - 13:12 | 4853838 More_sellers_th...
More_sellers_than_buyers's picture

If I hear the words "let me be clear" one more time I'm going to vomit...President, bloggers, even news reporters are saying this shit now.  WTF

Fri, 06/13/2014 - 13:15 | 4853853 kchrisc
kchrisc's picture

If you have a student-loan, quit paying on it. Get a deferment, or what ever, but just stop.

You won't be able to pay on it soon anyhow and they stole the "loan money" they loaned you anyways via fraudulent-reserve banking and counterfeiting.

The funds are better invested in gold, silver, steel and lead.

And while you are at it, look at others debt you can stop paying on.

 

The most powerful weapon the American people have is Rejection.

The system of fraud and theft that has been built up upon the backs of the American people is dependent upon our backs. Withdrew our backs, and the whole thing collapses. This is our greatest weapon.

Quit Paying--put it into food, steel and lead, and precious metals, etc. They stole what ever "debt money" they loaned you in the first place via fraudulent-reserve banking and soon you won't be able to pay them anyways, so just stop now.

Quit Obeying--If they are in violation of the Constitution then they are criminals and not legitimate.

Quit Playing--Quit being a tool for them to use.

The Four Rs
Rejection: Quit paying, quit obeying, quit playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: The guilty must answer for their crimes against the American people and the Constitution.
Restoration: Restore the American people, country and Constitutional republic.

Fri, 06/13/2014 - 13:58 | 4854126 Morla
Morla's picture

"But the proles, if only they could somehow become conscious of their own strength. would have no need to conspire. They needed only to rise up and shake themselves like a horse shaking off flies. If they chose they could blow the Party to pieces tomorrow morning. Surely sooner or later it must occur to them to do it? And yet ——!" -1984

Fri, 06/13/2014 - 15:07 | 4854443 cynicalskeptic
cynicalskeptic's picture

Easy to say but you're giving them an excuse to lock you up....... and at some point ANY excuse WILL be used.

Fri, 06/13/2014 - 13:19 | 4853871 Dr. Engali
Dr. Engali's picture

"To be clear, student debt has become a huge problem that demands attention."

No it doesn't damn it! Every time there is "attention" given to a problem it leads to a bail out and another fucking problem. Let the chips fall where they fucking may!

Fri, 06/13/2014 - 13:33 | 4853989 NidStyles
NidStyles's picture

The only attention I see with that loan sector is that it's not possible to declare bankruptcy. That leaves bad debt out there to stagnate and created issues with pricing signals. 

 

Bankruptcy is a good thing, and screw Bush for making it illegal. 

Fri, 06/13/2014 - 13:27 | 4853942 ejmoosa
ejmoosa's picture

I think the word "unintended" should never be used when referencing the consquences of Obama's actions.

Fri, 06/13/2014 - 13:28 | 4853954 Itchy and Scratchy
Itchy and Scratchy's picture

The great 'unintended' President!

Fri, 06/13/2014 - 13:34 | 4853993 Ample liquidity
Ample liquidity's picture

Oh dear, thought WE had a socialist system. To be fair though, this is probably a result of furious lobbying by, as I understand it, quite powerful people that have an interest in seeing the rich get richer and the status quo upheld. So you can feel safe, this is nothing like socialism :) greetings from helsinki btw

Fri, 06/13/2014 - 13:40 | 4854019 disabledvet
disabledvet's picture

These are the same policies the Republicans are pursuing.

Fri, 06/13/2014 - 13:55 | 4854110 Postal
Postal's picture

What?!?! Republicans acting like Democrats?! Say it ain't so!

/sarc

Fri, 06/13/2014 - 13:59 | 4854130 NoWayJose
NoWayJose's picture

They are not.  In fact, McConnell stopped a student loan bailout, forcing Senator Patty Murray to come to Kentucky to buy McConnell off with another hydroelectric dam, military base, or road project in Kentucky.  Thus the Republican view is different than the Democrat view, in that the Democrats just want the student loan bailout, whereas the Republican leaders want the same bailout plus some pork in their home barrel.

Fri, 06/13/2014 - 13:44 | 4854052 Jack Burton
Jack Burton's picture

We talk a lot about whether the degrees many student loan applicants take are worth it. I wonder how many kids are pushed by pressure of parents, high schools and peers into going to college going in debt and then find out their either can't or won't finish their degrees. This all seems to be a giant debt slave machine and way for more rent seeking. Actually, America has ceased to be an economy and is now a giant rent seeking and speculation machine.

Fri, 06/13/2014 - 14:08 | 4854106 JRobby
JRobby's picture

Seems to be no "degree to be earned vs future ability to pay" analysis by lenders.

You want to go? Heres the money. SALIE!!!!!! 

Fri, 06/13/2014 - 13:59 | 4854111 TrustbutVerify
TrustbutVerify's picture

I would like to see details of what makes up in total the outstanding student loans.  How many are for worthless degrees?  How many are padded with useless courses?  How many courses are mislabeled and are more political indictrination and politically correct courses? 

Give me an in-debpth look at where this money is going. 

Fri, 06/13/2014 - 14:06 | 4854173 Morla
Morla's picture

Don't worry, I'm sure these 18 year old kids are all brilliant economic forecasters and know just what the labor market will need over the next 50 years :\ Why else would we provide them with infinite credit to pursue their grand strategies?

Fri, 06/13/2014 - 14:09 | 4854186 de3de8
de3de8's picture

Really, you think that info is even tracked.....LOL

Fri, 06/13/2014 - 14:51 | 4854386 Postal
Postal's picture

Give me an in-debpth look at where this money is going.

http://monsvenuslive.com/

Fri, 06/13/2014 - 13:57 | 4854122 My Days Are Get...
My Days Are Getting Fewer's picture

The simple way to deal with the problem is to require the institution of higher learning, together with their Presidents and Boards of Trustees, to co-sign on every loan, making them third party guarantors.

 

Loan volume will drop 95%.  Institutions will give loans only to those deemed to be "jobable" after college.

Tuitions will drop.  On-line learning will skyrocket.

 

Alas, that will never happen.  Park them kids in college and keep them off of the unemployment statistics.

Fri, 06/13/2014 - 14:13 | 4854208 Joebloinvestor
Joebloinvestor's picture

Like i proposed:

Get GS to bundle the loans like subprime mortgages based on GP and chosen major/degree.

Market them as "Invest in America" or some catchy phrase.

Expect defaults on the humanities and arts.

Fri, 06/13/2014 - 15:22 | 4854525 Oldrepublic
Oldrepublic's picture

solution to high university costs: learn Chinese, Spanish, Portuguese or Russian then study in one of the BRICS

at a cheap university!

Fri, 06/13/2014 - 15:42 | 4854585 yellowsub
yellowsub's picture

Forgiving debt doesn't create jobs.  

Fri, 06/13/2014 - 15:45 | 4854603 Vin
Vin's picture

This is all very interesting, but the issue at hand has been totally missed. 

The Federal Govt must, according to our Constitution, only spend for the General Welfare, not the Specific Welfare of individuals, groups, regions or States. 

Therefore, they have zero authority to make loans of this type.  In fact, I don't see any authority to make any type of loans.  Do you?

Sat, 06/14/2014 - 20:37 | 4857641 RichardParker
RichardParker's picture

Vin:

You are correct when you assert "The Federal Govt must, according to our Constitution, only spend for the General Welfare, not the Specific Welfare of individuals, groups, regions or States. "

However the left will demonize/accuse you of being a racist who hates poor people and the sheeple will buy into it.

 

Fri, 06/13/2014 - 15:49 | 4854612 thomasco
thomasco's picture

It's policies like this one that divide Americans from each other on yet an additional plane.

I feel sorry for the person who did not get the chance to attend college (and missed the good time), yet eventually learns that he or she is paying for some stiff on Hillary Clinton's staff who defaulted or got their loan forgiven.  

When the rest of us American milk cows also understand the sweet deal the educational loan system was for all the leftie professors and bureaucrats, the government will sink further in our estimation of competence and fairness.

Fairness is a prime component of our sense of America's greatness.  Yet every day, Barry and his pals whittle more fairness away.

Fri, 06/13/2014 - 16:04 | 4854653 innertrader
innertrader's picture

ALL I can say, is that the THREE smartest Traders (their OWN money) that I know of have ALL left the country.  The first one left in 2001, the last one left in 2007 !!!!!!!  To know and not act, is the same as not knowing!!!

Fri, 06/13/2014 - 16:31 | 4854750 sethstorm
sethstorm's picture

Get rid of the non-dischargeable-in-bankruptcy provision and you'll see them address viability quickly.  It might also incentivize lenders to actually help with finding suitable work.

Fri, 06/13/2014 - 16:44 | 4854801 JuliaS
JuliaS's picture

Up to this point we've been pushing demand forward through losening of lending standards, accepting less and less collateral.

Since the student loan are non-collateralized, the demand or future productive capacity being pushed forward is purely hypothetical and unproven. Actually, what's almost certain is that the future return on investment will be negative, with lack of jobs and even greater deficiency of jobs related specifically to diplomas for which the money is being charged.

It's a diminishing return going negative. Under normal economics, if return declines below investment, the process ceases naturally. Only with intervention it is possible to drag, metaphorically speaking, the barrel of extracted oil to the point where it takes 2 to get it out of the ground.

Student loan bubble is worse than sub-prime because in case of housing, there's at least property that doesn't disappear if the borrower defaults on the loan. One half of the equation does not meet the other. With students, there's an = sign with nothing on either side.

Fri, 06/13/2014 - 17:51 | 4855022 Duc888
Duc888's picture

 

 

Problems with student loan programs are deep-rooted – thanks mostly to the government’s domination of the market – and were only worsened by Obama’s actions this week.

 

The Midas touch, everything he does turns to shit.

Capt'n Brown finger himself. 

 

But hey, vote early, vote often, and please by all means vote for the RED/BLUE team. 

Consent to either anal raping or oral raping.

Fri, 06/13/2014 - 17:58 | 4855041 Duc888
Duc888's picture

 

 

Vin :This is all very interesting, but the issue at hand has been totally missed. 

The Federal Govt must, according to our Constitution, only spend for the General Welfare, not the Specific Welfare of individuals, groups, regions or States. 

Therefore, they have zero authority to make loans of this type.  In fact, I don't see any authority to make any type of loans.  Do you?

 

"The Constitution"....that's some funny shit there hoss.  Might as well drag out the Magna Carta.  That shit is so yesterday.  Welcome to the Post Constitutional era.

Fri, 06/13/2014 - 19:07 | 4855223 sam site
sam site's picture

 

Just like the deceptive loan program to help poor people to buy homes that really benefitted the finance and homebuilder industry, the student loan program was deceptively advertised as a tear jerker and sympathy do-gooder program to deceive the masses.  If you follow the money, the colleges benefitted and the students ended up saddled with massive debt.  It made college costs no more "affordable" than another fraud called the Affordable Care Act claimed to make healthcare "affordable". 

Welcome to the United States of Deception where fraud is everywhere you look.  Someday college lectures will be given on youtube and campuses will be ghost town representing relics of the past like ghost towns as global competition heats up.

America is about to learn it can no longer afford bullsh*t college "learning centers" that dispense mostly knowledge constructs that have no practical usefullness.  Like wars, banker scams, social programs and bullsh*t quack medicine that depends on government protection from competition, the emerging paradigm along with the new global gold standard is that the future belongs to the low cost producer of goods. 

All these wastefull industries - are going to collapse because they add no value to our manufacturing.  Just more fraudulent waste that makes us uncompetitive and an extinct country the sheeple are unaware of.  Too bad the chinese bought into the US bullsh*t paradigm of colleges and malls.  Now they have ant herds of grads and empty unaffordable malls.  At least they didn't screw their students with a massive fraudulent college- subsidy debt program. 

Sat, 06/14/2014 - 20:26 | 4857619 RichardParker
RichardParker's picture

I can't help but think that this would be a perfect strategy to eventually socialize higher education as seen in England.  Avoid having students directly pay to attend college by jacking up the taxes on every other single person in the country to make up the difference because "it is the right thing to do" or some shit like that.

As education debt is soars in to the stratosphere, we bailout the debtors which of course would also bailout banks lending a student $120,000+ to get a B.A. and  masters in sociology or some other completely worthless degree.  Banks make their money on the loan, students get the (mostly worthless) education they ERRONEOSLY think they are entitled to while adminstrators in the education complex make a fucking killing off of the whole thing between crazy salary/benefits/retirement packages etc and jack up tuition even further as they overbuild more palacial infrastructure on the college xcampuses (think luxury dorms and student activity centers etc.).

 

Sun, 06/15/2014 - 15:33 | 4859014 zipit
zipit's picture

This is the key talking point of all things student loans: "The right way to think about student loans is that they are a gift from taxpayers to the higher education industry, both non-profit and for-profit. Most of the benefit goes to those who work in that industry, not to students. Most of the risk is borne by students and taxpayers, not by those who work in the industry.

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