[Jinxu]

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The Student Loan Scam:

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Student Loan Testimonial:

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Any Thoughts?

[Morro]

Should I mention mine ballooned to well over 2 times my original amount at one point? Yes, Sallie Mae.

[Jinxu]

	Originally Posted by Morro To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	Should I mention mine ballooned to well over 2 times my original amount at one point? Yes, Sallie Mae.

That's the typical story I've read about from people's testimonial. That's sad, unfortunate, and thievery.

[athenian200]

You know, I always thought there was something fishy about the way they tried to push college on us. I mean, there's only a $20,000 discrepancy between the average incomes, and that could be explained by several other factors. I know out-of-work college graduates and almost-rich people with GEDs.

[zibber]

Student loans should not be in the hands of private companies.

[jndiii]

	Originally Posted by athenian200 To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	You know, I always thought there was something fishy about the way they tried to push college on us. I mean, there's only a $20,000 discrepancy between the average incomes, and that could be explained by several other factors. I know out-of-work college graduates and almost-rich people with GEDs.

I'm very much in agreement with you on this. College is the new high school, only more expensive. Now instead of going to college, those looking to get ahead go to graduate school.

	Originally Posted by zibber To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	Student loans should not be in the hands of private companies.

Sallie Mae is a GSE, a government-sponsored enterprise. Note the phrase in the last paragraph, "... cannot afford to pay back the wildly increased amounts that the federal law has allowed to be imposed upon them."

Truly private companies wouldn't be making the loans in the first place without some sort of government sponsorship or guarantees. Put it in the hands of some government office, the same federal laws and guarantees would result in the same hardship on students, the only difference is that there isn't a nominally private company making profits.

Not to derail the thread, but this is not very different from the Fannie Mae and Freddie Mac contributions to the credit crisis.

[Aristocrat Porn]

	Originally Posted by athenian200 To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	You know, I always thought there was something fishy about the way they tried to push college on us. I mean, there's only a $20,000 discrepancy between the average incomes, and that could be explained by several other factors. I know out-of-work college graduates and almost-rich people with GEDs.

I find this funny because I dont think anyone outside of america would ever say that. I dont mean it as an insult, it's just that the way american society is allows for such perceptions to exist (and to also be true in some scenarios). It is almost unique in this aspect.



Needless to say, if you are not american, im screwed.

[Jinxu]

	Originally Posted by jndiii To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	Sallie Mae is a GSE, a government-sponsored enterprise.

That is false information. Sallie Mae started out as a GSE, but became a private company starting in 1997.

	The Student Loan Marketing Association was originally created in 1972 as a government-sponsored enterprise (GSE) and began privatizing its operations in 1997, a process it completed at the end of 2004 when Congress terminated its federal charter, ending its ties to the government. Source: To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

[jndiii]

	Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	That is false information. Sallie Mae started out as a GSE, but became a private company starting in 1997.

Yes and no.

It wasn't fully "privatized" until
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. Further, it doesn't change the fact that it's dealing in federally guaranteed loans that are covered by federal law, which is the source of the problem.

No bankrupty protection? No refinancing? Apparently only on government-guaranteed student loans. Let's be thankful that most other sources of credit have no such "guarantees."

[Jinxu]

Originally Posted by jndiii To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Yes and no. It wasn't fully "privatized" until To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts. . Further, it doesn't change the fact that it's dealing in federally guaranteed loans that are covered by federal law, which is the source of the problem. No bankrupty protection? No refinancing? Apparently only on government-guaranteed student loans. Let's be thankful that most other sources of credit have no such "guarantees."

I am wondering what is your definition of the "problem"? It doesn't seem like you are discussing the same topic in the OP. The main topic isn't about the huge amount of student loans, but about the strings that are attached to them.

I'm an interested in how people will reply to this thread considering that a majority of members here are around college age. I would assume that the topic would interest many of them, but I doubt that is the case. More likely I think many would prefer to stay blissfully in ignorance. I know some people that don't even want to think about their student loans while in school. Rather, they said they'll just "worry about it after graduation".

[Sulurith]

I'm a bit worried about my financial situation. I'll be going into my first year of college in the fall, and my choice wasn't the best fiscally. For reasons that made sense (without factoring in the greater risk than I knew of ballooning student loan debt) I decided not to go to a state school despite finding that most private institutions would mean a bit of hardship later on when I would be devoting to most of my post-collegiate income to paying off the debt while single. Perhaps I was a bit naive, oh well, I'm stuck now.

[phej]

What is wrong with the strings attached to a student loan? I know it sounds onerous that these loans are
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in the event of bankruptcy, but why is that fundamentally bad? Getting an education loan is extremely risky for both lender and borrower: if the borrower fails his education, then there is no expected cash stream to pay off the debt. That sounds like a pretty damn good incentive to choose an education that leads to income that pays off the debt.

I'm well aware that some will argue that the interest rate should be below market value. That is the government should subsidize student loans. To which I ask, how does that prevent tuition inflation that exceeds consumer inflation without creating a shortage of education?





phej added to this post, 0 minutes and 45 seconds later...

Originally Posted by Sulurith To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

I'm a bit worried about my financial situation. I'll be going into my first year of college in the fall, and my choice wasn't the best fiscally. For reasons that made sense (without factoring in the greater risk than I knew of ballooning student loan debt) I decided not to go to a state school despite finding that most private institutions would mean a bit of hardship later on when I would be devoting to most of my post-collegiate income to paying off the debt while single. Perhaps I was a bit naive, oh well, I'm stuck now.

How are you stuck? you can always transfer back to your state school.

[Jinxu]

	Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	What is wrong with the strings attached to a student loan?

I would advise any student to educate themselves about the student loan industry. One book to read is The Student Loan Scam by Alan Collinge who wrote the article in the OP. Other sources of information is to read other people's testimonial about their account with student loans. I've provided a link in the OP:

Readers may already be familiar with Alan Collinge from his website [...] or his appearance on "60 Minutes" two years ago in a piece about the student lender Sallie Mae and the way that it has destroyed the lives of many college graduates by burdening them with exorbitant fees and finance charges on their student loan debts. College is the riskiest and perhaps the most foolhardy investment anybody can make, as student loan debts can NEVER be erased with bankruptcy. Warning to parents: NEVER cosign on a student loan. Many parents are facing financial ruin because they cosigned on a student loan for a child. This 150 page book examines the huge student loan industry and how it derives colossal profits by destroying peoples' lives. Chapter 1 - "The Rise of Sallie Mae and the Fall of Consumer Protections" -How Sallie Mae became a vertical corporation with control of all aspects of student loans: issuing loans, guarantees, and collections. In 2002 it purchased Pioneer Credit Recovery, a student loan collection company. It lobbied Congress for laws that permitted huge penalties and fees for defaulted debt. Chapter 2 - "Who Benefited" - The huge salaries of Albert Lord, CEO of Sallie Mae, and other executives in the industry. Reveals that Edfund, a "guarantor"--is just another entity that relentlessly extracts money from debtors. Chapter 3 - "Collection Abuses" and Chapter 4 "The Borrowers" - Readers may have already heard some of these stories from[...]. One particularly sad story is a graduate of Illinois State University who committed suicide after completing his master's in chemistry because his student loans had grown to $100,000. Many student debtors report being called several times every day by Sallie Mae loan shark collectors. Chapter 5 - "The Oversight Fiasco" and Chapter 6 "Corruption of the Universities" - The most shocking part of the book. Describes how numerous personnel of the Dept. of Education are actually former Sallie Mae officers, and instances where university financial aid officials hold stock in student loan companies such as Student Loan Xpress. Also describes kickbacks, donations, luncheons, and gifts paid by student lenders to universities in return for steering their incoming freshmen to those lenders (such as putting them on "preferred lender lists"). These universities include the University of Nebraska, Johns Hopkins, the University of Texas at Austin, and many others. For example, one financial aid director of Johns Hopkins received $93,000 from American Express and Student Loan Xpress. On many occasions, students who called their universities' student loan hotlines didn't know they were really talking to representatives of student loan companies. Chapters 6-8 "The Grass Roots Awaken" ," Solutions", "Practical Advice for Students" Collinge offers little hope for current debtors --at this time legislation to allow student loans to be discharged in bankruptcy is nowhere close to being passed. However, perhaps the groundwork is being laid for the next generation of lawmakers to revise the laws concerning student loan debt. This book about student loans is extremely relevant and timely. We are in the Depression of 2009 and it is obvious that college graduates may not find gainful employment. Sallie Mae and other student lenders don't care about your problems with unemployment, sickness, a death in the family, or anything else. They will hound you until your debts are paid or until you are resting in your grave.

Jinxu added to this post, 16 minutes and 15 seconds later...

	Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	I know it sounds onerous that these loans are To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts. in the event of bankruptcy, but why is that fundamentally bad?

Let say you originally borrowed $20,000 (the average), but defaulted later on. But because of new laws your loan can't be discharge through bankruptcy and you are not protected by standard consumer's right law that apply to other type of loans. Your loan is then sent to a collection agency who adds various penalties, fees and higher interests onto your loan. So now you owe them $60,000 (3x the original loan). Your minimum payment may be $500 or more per month. If you can't afford to pay, the collection agency can garnish money from your wages, SSI, and/or disability benefits. All this is legal and they don't need your consent. If you were a doctor or lawyer, they can take away your license so that you can't practice in your field. By doing all this, they trap you into owing money for the rest of your life. Even if you can make the minimum payment, it will only go to interests and your principal will continue to grow so that by the time you are 70, you may owe them over $100,000. You will end up paying them back much more than the original $20,000 loan through fees, penalties, and interests. They will basically own you. By defaulting on your loan, they make more money from you. That gives them an incentive to have you go into default by using whatever tactics they see fit.

Do you think that is fair?

[nvarsj]

The student loan system really sucks. The interest rates are outrageous - I think my Wells Fargo private loan at one point was around 13 or 14 points.

It's also sort of a peeve of mine that those getting practical degrees, like engineering, pay the same exact "risk" that those getting a psychology degree would pay. Of course, I'm biased ;-). But I do think we need more scientists and engineers, and less lawyers/psychologists/etc. Getting off topic...

Tie this into the problem that state school costs are inflating rapidly. In the last few years the cost of a UC has at least doubled.

I don't think we'll see the full effects of this for a couple more decades. I don't see it getting any better either. America's future as an ogliarchy is assured at this point. Hell we're pretty much there already.

[phej]

Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Let say you originally borrowed $20,000 (the average), but defaulted later on. But because of new laws your loan can't be discharge through bankruptcy and you are not protected by standard consumer's right law that apply to other type of loans. Your loan is then sent to a collection agency who adds various penalties, fees and higher interests onto your loan. So now you owe them $60,000 (3x the original loan). Your minimum payment may be $500 or more per month. If you can't afford to pay, the collection agency can garnish money from your wages, SSI, and/or disability benefits. All this is legal and they don't need your consent. If you were a doctor or lawyer, they can take away your license so that you can't practice in your field. By doing all this, they trap you into owing money for the rest of your life. Even if you can make the minimum payment, it will only go to interests and your principal will continue to grow so that by the time you are 70, you may owe them over $100,000. You will end up paying them back much more than the original $20,000 loan through fees, penalties, and interests. They will basically own you. By defaulting on your loan, they make more money from you. That gives them an incentive to have you go into default by using whatever tactics they see fit. Do you think that is fair?

That sounds like a crappy situation, but no one put a gun to the borrowers head to sign the loan and take the obligation. The borrower agreed to these terms. So from my perspective, the borrower agreed with the lender that a fair transaction was being made. I don't see a trap---you may, but I would argue the borrower didn't do due diligence when entering the contract if the borrower feels trapped. Like I said earlier, these loans are extremely risky for the lender and for the borrower, so there needs to be good incentive for the borrower to pay the loan.

What would you do with student loans? Cap the interest rate? Make it easier to discharge? Make it easier to modify? Have the government subsidize it further? You can do all of these things, but this would simply limit the amount of credit that lenders are willing to lend. (Except the government subsidy which adds more inflation fuel). To which I wonder, we're talking about the borrowers who basically fail in paying back their loan, what of the folks who do pay off their student loans and get a large increase in actual and potential earnings? I haven't found the statistics on this group, but do you want to limit the credit supply for them?

Bankruptcy courts are reluctant to discharge the loans, but they do if it is an undue hardship

Originally Posted by Brunner v. New York State Higher Education Services, 831 F2d 395, 396 (2d Cir. 1987)

Undue hardship requires a three-part showing: (1) that the debtor cannot maintain, based on current income and expenses, a minimal standard of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans.

[Jinxu]

Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

That sounds like a crappy situation, but no one put a gun to the borrowers head to sign the loan and take the obligation. The borrower agreed to these terms. So from my perspective, the borrower agreed with the lender that a fair transaction was being made. I don't see a trap---you may, but I would argue the borrower didn't do due diligence when entering the contract if the borrower feels trapped. Like I said earlier, these loans are extremely risky for the lender and for the borrower, so there needs to be good incentive for the borrower to pay the loan.

I can see that you have little to no sympathy for the borrowers. You may be lucky not to have take on loans, but some are not. The situation is more like students are being "tricked" into taking out loans. We live in a culture were people say it's important to go to college and if you can afford, take out student loans. Universities will even encourage and/or promote some preferred lenders to student in return they get a profit. From the book:

Chapter 5 - "The Oversight Fiasco" and Chapter 6 "Corruption of the Universities" - The most shocking part of the book. Describes how numerous personnel of the Dept. of Education are actually former Sallie Mae officers, and instances where university financial aid officials hold stock in student loan companies such as Student Loan Xpress. Also describes kickbacks, donations, luncheons, and gifts paid by student lenders to universities in return for steering their incoming freshmen to those lenders (such as putting them on "preferred lender lists"). These universities include the University of Nebraska, Johns Hopkins, the University of Texas at Austin, and many others. For example, one financial aid director of Johns Hopkins received $93,000 from American Express and Student Loan Xpress. On many occasions, students who called their universities' student loan hotlines didn't know they were really talking to representatives of student loan companies.

As for your other questions, a good starting place would be to return basic consumer protection right to student loans. About your supply/demand questions, there's an alternative call the Federal Direct Student Loan Program (FDSLP). This program allow students to borrow directly from the government without banks as the middlemen. However this program is slowly being killed despite some studies that show it cost the tax payer 1/5 less than the other program (FFELP). Most universities only allow students to choose the FFELP program, so it's not like they have an option. That doesn't sound fair to students.

The William D. Ford Federal Direct Loan Program (FDLP), often referred to as "Direct Loans," is a United States Department of Education program that provides loans to help students pay for education after high school. The Department of Education acts as a lender, providing funds for Stafford loans and PLUS loans in the same amounts as the Stafford and PLUS loans offered through the Federal Family Education Loan Program (FFELP). The Department of Education allows schools to choose which program, FDSLP or FFELP, best suits the needs of its students. The Department of Education does not currently allow a student to choose an FDSLP loan if the school chooses to participate in FFELP, and vice versa. However, students may be able to choose to consolidate loans under either FDSLP or FFELP. Source: To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

Jinxu added to this post, 19 minutes and 35 seconds later...

	Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	Bankruptcy courts are reluctant to discharge the loans, but they do if it is an undue hardship

I think that you are using misleading words. Courts are not reluctant, it's in the law that student loans can't be discharged. The law may sound as clear as being black and white on paper, but it's not in real life. What's the definition to what is "hardship" for example? That's open to interpretation.

[thod]

	but no one put a gun to the borrowers head to sign the loan and take the obligation.

In effect this is exactly what they are doing. They say "if you do not go to college you will be seen as stupid and spend your life on minimum wage, if you do you will be seen as smart and earn far more, making it easy to pay it back". Its pretty much the same with housing mortgages, nobody puts a gun to your head, you either take the loan or you sleep on the sidewalk. Thus these are not take it or leave choices. You are asked to choose between a bad option or a worse one.

[Synamon]

Originally Posted by thod To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

In effect this is exactly what they are doing. They say "if you do not go to college you will be seen as stupid and spend your life on minimum wage, if you do you will be seen as smart and earn far more, making it easy to pay it back". Its pretty much the same with housing mortgages, nobody puts a gun to your head, you either take the loan or you sleep on the sidewalk. Thus these are not take it or leave choices. You are asked to choose between a bad option or a worse one.

Except that there are more than two options. It's the same entitlement or "I have to have it all right now" attitude that results in the US having crippling levels of credit card and personal debt. The problem is making the choice to attend the most expensive school and deciding to finance it with student loans. This post right here is a pretty good example of that:

Originally Posted by Sulurith To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

I'm a bit worried about my financial situation. I'll be going into my first year of college in the fall, and my choice wasn't the best fiscally. For reasons that made sense (without factoring in the greater risk than I knew of ballooning student loan debt) I decided not to go to a state school despite finding that most private institutions would mean a bit of hardship later on when I would be devoting to most of my post-collegiate income to paying off the debt while single. Perhaps I was a bit naive, oh well, I'm stuck now.

You aren't stuck, you can make other choices as you go along. There is the option to transfer to a less expensive school. You can work while in school (not easy but people do manage it), try and get scholarships, postpone attending college, etc. You may not like the other options, but they do exist.

[phej]

Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

I can see that you have little to no sympathy for the borrowers. You may be lucky not to have take on loans, but some are not. The situation is more like students are being "tricked" into taking out loans. We live in a culture were people say it's important to go to college and if you can afford, take out student loans. Universities will even encourage and/or promote some preferred lenders to student in return they get a profit.

So there's corruption and that can be remedied. It is important to go to college, but I doubt that it is necessary. If need be, why graduate in four years as a full time student? Why not be a part time student? Why go to an expensive school? Get a scholarship or fellowship. Anyway, it sounds like the borrower didn't do due diligence in signing on the dotted line for the loan. People should never sign any contract under any amount of pressure and if there is pressure from the other side, then walk away.

Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

As for your other questions, a good starting place would be to return basic consumer protection right to student loans. About your supply/demand questions, there's an alternative call the Federal Direct Student Loan Program (FDSLP). This program allow students to borrow directly from the government without banks as the middlemen. However this program is slowly being killed despite some studies that show it cost the tax payer 1/5 less than the other program (FFELP). Most universities only allow students to choose the FFELP program, so it's not like they have an option. That doesn't sound fair to students.

I've already addressed this. This is a subsidy, which leads to more tuition inflation. Is this what you want?

	Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	I think that you are using misleading words. Courts are not reluctant, it's in the law that student loans can't be discharged. The law may sound as clear as being black and white on paper, but it's not in real life. What's the definition to what is "hardship" for example? That's open to interpretation.

You can discharge the education loan in bankruptcy, it's not automatic so you have to ask for it and pass the three parts of the undue burden test.

Originally Posted by thod To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

In effect this is exactly what they are doing. They say "if you do not go to college you will be seen as stupid and spend your life on minimum wage, if you do you will be seen as smart and earn far more, making it easy to pay it back". Its pretty much the same with housing mortgages, nobody puts a gun to your head, you either take the loan or you sleep on the sidewalk. Thus these are not take it or leave choices. You are asked to choose between a bad option or a worse one.

As for the housing mortgage, it's not a dichotomy between sign this loan or live out in the sidewalk. You can always get a cheaper house, live in an apartment, have housemates, live with your parents. The same thing with education, there are more choices available.

[Jinxu]

Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

So there's corruption and that can be remedied. It is important to go to college, but I doubt that it is necessary. If need be, why graduate in four years as a full time student? Why not be a part time student? Why go to an expensive school? Get a scholarship or fellowship. Anyway, it sounds like the borrower didn't do due diligence in signing on the dotted line for the loan. People should never sign any contract under any amount of pressure and if there is pressure from the other side, then walk away. As for the housing mortgage, it's not a dichotomy between sign this loan or live out in the sidewalk. You can always get a cheaper house, live in an apartment, have housemates, live with your parents. The same thing with education, there are more choices available.

Much of your responses show a lot of short-sightedness. You write like everything is simple and black & white. For example, you wrote "corruption and that can be remedied" and it made me laugh. Do you have a plan? As if getting rid of corruption is an easy thing to do.

	1) I've already addressed this. This is a subsidy, which leads to more tuition inflation. Is this what you want? 2) You can discharge the education loan in bankruptcy, it's not automatic so you have to ask for it and pass the three parts of the undue burden test.

1) How much more? Got a number. Is it more than the 2x the rate of inflation that is going on now?

2) Again you write like it is an easy thing. What do you expect borrowers to do? Go willingly into extreme poverty or break their two legs to make themselves disable?

[phej]

	Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	Much of your responses show a lot of short-sightedness. You write like everything is simple and black & white. For example, you wrote "corruption and that can be remedied" and it made me laugh. Do you have a plan? As if getting rid of corruption is an easy thing to do.

Nope, I'm not writing like it's black and white. Yes, corruption can be remedied, but I was under the impression that we weren't talking about corrupt university or government officials. So I succinctly noted it and moved on to what I thought the topic was.

	1) How much more? Got a number. Is it more than the 2x the rate of inflation that is going on now?

A fast google search yielded this:
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One of the graphs. The link doesn't give an analysis of why there is a disparity in inflation.


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This link does:
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and there are probably more academic analyses of the underlying causes.

	2) Again you write like it is an easy thing. What do you expect borrowers to do? Go willingly into extreme poverty or break their two legs to make themselves disable?

No I don't. Like I said, there are other choices to make in education. Many, many choices made before bankruptcy is even a remote possibility. There are probably more people who have succeeded with student loans (and paid them off) than have failed. If this weren't true, then why would these loans be offered? In other words, the lender/investor expects to make a profit. If there weren't any profit, the loans would simply disappear.





phej added to this post, 42 minutes and 6 seconds later...

sigh... I should probably stop reading this thread before I get all flamey...

[Jinxu]

	Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	In other words, the lender/investor expects to make a profit. If there weren't any profit, the loans would simply disappear. sigh... I should probably stop reading this thread before I get all flamey...

You give up so easily. About your profit statement, I guess you skimmed over what I said about how they made their profit. You provide little backup to your defense. The graph you presented didn't do much, but backed up what I said about tuition growing a twice the rate of inflation. I'm unsure as to what you are trying to say by posting it. Furthermore, I stated that bankruptcy is not a smart option for student loans because it can't be discharged and there are unfair penalties. I've even provided an example. You replied with saying that there are options before bankruptcy can be made. What is your point? What are you even trying to argue?

Also, you disagree that you see thing in black and white. I'll give you that because I don't know you. However, your recent post still show signs of short-sightedness.

[phej]

Originally Posted by Jinxu To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

You give up so easily. About your profit statement, I guess you skimmed over what I said about how they made their profit. You provide little backup to your defense. The graph you presented didn't do much, but backed up what I said about tuition growing a twice the rate of inflation. And I'm unsure as to what you are trying to say by posting it. You disagree that you see thing in black and white. I'll give you that, I don't know you too well. However, your recent post still show signs of short-sightedness.

I'm giving up because you don't see my point: there are alternatives to borrowing for one's education (which have been enumerated) that don't lead to financial ruin. If you can't cover your obligations, don't act like an entitled victim about it. But, fine, I'll be short sighted.

[Jinxu]

	Originally Posted by phej To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.
	there are alternatives to borrowing for one's education (which have been enumerated) that don't lead to financial ruin. If you can't cover your obligations, don't act like an entitled victim about it.

Okay. If that's your defense, then list them.

	But, fine, I'll be short sighted.

I'm not arguing with you there.
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[thod]

No I don't. Like I said, there are other choices to make in education. Many, many choices made before bankruptcy is even a remote possibility. There are probably more people who have succeeded with student loans (and paid them off) than have failed. If this weren't true, then why would these loans be offered? In other words, the lender/investor expects to make a profit. If there weren't any profit, the loans would simply disappear.

Should every student repay, then the cost of this finance should be comparable with treasury yields. The investor is guaranteed capital return in each case and would move to finance student loans if the coupon was greater. Any additional sums demanded by investors must originate from additional factors, cost of administration for example. Should some students not repay, then the extra credit default risk must be accounted for in the yield. If these loans are returning excessive profits for the lenders then other lenders would be expected to enter the market offering more favourable terms.

Part of the argument here is not about the costs associated with a perfect payment record, but about the charges added to the account through any form of default or irregularity. These charges are in excess of the actual damage to the lender and are thus seen as profiteering via a hidden mechanism. Each borrower believes they will not default and so be unaffected, the companies know that a percentage will, and bank on this for making a profit. This is akin to banks making excessive charges for an overdrawn account.

The other aspect would appear to resemble that of the sub-prime mortgage fiasco. The companies know that there are not enough high paying jobs to place all the aspirants. Thus many of those who go into debt in order to obtain such jobs will fail to find such. A conventional investor knows that some of his investments will fail and he will not receive any payback. He is selective with his investments in order to minimize this. Yet in this case we have investors with guaranteed payback, thus caution over risk is not applied and loans are advanced to study even the least useful of degrees. To bring it into line with other categories of investment, they must understand they are investing in the student rather than making a guaranteed loan. Should that student fail to find that high paying job, they lose the investment. This would of course lower the number of loans on offer. However we currently have over investment in education, resources are being allocated to make a product for which there is no demand (graduates). Banks have to decide if they will loan to a business. No matter how much the business owner thinks its a good idea, they must decide their own opinion. If the business fails, the bank loses its money.