Observations on life

About those student loans. An in-depth look

One reader feels the student loan “crisis” it is only because the federal government has taken over the student loan business that there are no checks on borrowing. Because it is the taxpayer who is ultimately at risk, individuals are allowed to borrow based on an arbitrary set of rules that are more focused on “need” (for the funding) than ability to repay the loan.

This has become so obvious that the government has devised options to allow borrowers to avoid paying much of the debt they incur by setting arbitrary repayment rules, as well.

Bottom line, no bank would make such loans if they could be discharged in bankruptcy. It is only taxpayers (and our elected representatives) who are so stupid as to allow, in fact encourage this result.

See: https://studentloanhero.com/featured/the-complete-list-of-student-loan-forgiveness-programs/

Here are the programs:

– Public Service Loan Forgiveness (PSLF)

– Forgiveness with Income-Based Repayment (IBR)

– Forgiveness with Pay As You Earn (PAYE)

– Forgiveness with Revised Pay As You Earn (REPAYE)

– Forgiveness with Income-Contingent Repayment (ICR)

– Federal Perkins loan cancellation

– Student loan forgiveness for teachers

– Student loan forgiveness for nurses

– Loan repayment assistance for doctors and other health care professionals

– Loan repayment assistance for lawyers

– Student loan repayment assistance programs for other careers

– Military student loan forgiveness and assistance

– Student loan discharge for special circumstances

A little history:

As part of health reform, one of America’s laws which keeps on giving grief, the federal government took over the student loan program promising savings for taxpayers. Obvious from the start, this would add to the budget deficit. The government representatives were again buying votes with taxpayer dollars. See a Forbes article in 2010 which accurately predicted the fiscal fiasco, and a 2018 WSJ article which confirmed the anticipated result was obtained::

https://www.forbes.com/2010/05/10/student-loans-hcera-leadership-education-fox.html#453f02606edd, and

https://www.wsj.com/articles/u-s-student-loan-program-losing-money-as-borrowers-seek-debt-forgiveness-151758740

Subsequently, once the problems became apparent and student debt loan was increasing rapidly, it was only a few years ago that President Obama gave us a brand new forgiveness program – and, it’s major shortcoming, from a student’s perspective, is that it appears to be difficult to use. No one seems all that concerned about the cost to taxpayers.

What Is Obama Student Loan Forgiveness?

And, ironically, all of these forgiveness programs would, if properly communicated, actually exacerbate the problem, encouraging individuals to borrow even more with the expectation that it will all be forgiven, someday.

Prepared by a faithful reader of this blog.

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2 replies »

  1. I would not call this article an “In-Depth” report. However, this article does succinctly describe the sad state of affairs regarding the student loan debacle. Sometimes, the solutions we create ultimately end up being worse than the problems they were intended to resolve.

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  2. Some of these programs if properly administered could further sound government policy but that is not the current case. I am totally against any income based “forgiveness”. They knew the debt that they were taking on. Just like the GI Bill, these students should do something to earn the benefit of a higher education. Currently, the private sector is offering critical career fields tuition assistance as a benefit. But students should not expect to graduate and have this benefit because the need might be filled four years later. Students should be approved prior to going to school not after the fact for a tuition assistance program. They should have contracts in hand for example to teach in the middle of nowhere or an inner city school for 10 years, or to be a lawyer in a public defender’s office for 10 years. I would make the student pay the interest for those 10 years and if they complete their obligations, then pay off the loan for them honoring their contract. In most cases, even the military gets their money back for students who drop out of the military academies.

    The real solution is not to give tuition assistance to critical careers but to raise the pay to make people want to move to a town of 500 or work in the public defender’s office.

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