Student Loan 'train wreck' predicted

[marmar]

from AP, via MSNBC:



Sallie boss warns of student loan ‘train wreck’
House OKs measure to get more money to struggling lender

updated 7:14 p.m. ET, Thurs., April. 17, 2008


WASHINGTON - Sallie Mae says it cannot write money-losing student loans indefinitely.

Top executives are holding “daily deliberations” about just how long the nation’s largest student lender can afford to sacrifice its bottom line for the sake of college-bound Americans, Sallie Mae CEO Albert J. Lord said Thursday.

Lord told analysts on an earlier conference call: “We’ve been predicting something of a train wreck” in mid-2008 without prompt changes in a market hit by fallout from the subprime mortgage crisis and cuts last year in federal subsidies to student lenders.

Experts said that, unless the government intervenes or market conditions rapidly improve, Sallie Mae could have no choice but to stop writing new federally backed loans.

House lawmakers on Thursday approved a measure to boost the availability of credit for Sallie Mae and other student lenders, and analysts believe the Treasury department could act as soon as next week. ......(more)

THe complete piece is at: http://www.msnbc.msn.com/id/24167304/

[mediaman007]

1. Doesn't anyone pay these loans back?

Shouldn't there be an income from the loans that they have granted?

[Deja Q]

3. Like the jobs people train for?

:shrug:

If the wages being offered for jobs is x, then the cost of training should match - the current imbalance can only lead to problems like this. After all, to get a Associates degree in graphic design -- that costs $40,000 but the jobs available pay $30,000 and are being offshored anyway.

[Bandit]

4. NO

Why shouldn't the Government grant no interest student loans? What better use for tax payer money could there be, Oh I know how about killing Muslims, yep much better use of our money than educating our future leaders..

[DadOf2LittleAngels]

16. Interest should be inflationary..

[PeaceNikki]

12. They never go away. They sit uncollected for years and years.

Accruing interest and penalties the whole while.

After default with the bank and then the state, they go to the Federal government (who holds ultimate guarantee). When I dealt with them, penalties of 42.84% were assessed to subrogated loans - that accrues along with the interest (not sure if still the case).

They are 3rd in line behind IRS and child support. Tax refunds can and are seized to pay, wages can be garnished without a court order and they will remain on your credit bureau reports the whole while as a Federal debt.

They are not dischargeable in bankruptcy. They are never written off as bad debt.

[Gormy Cuss]

17. The problem isn't caused by failure to pay back. It's about securities and profitability.

Sallie Mae lost $104 million in the first quarter as it grappled with higher borrowing costs, restructuring charges and other factors, though Lord said in a conference call with analysts that the company would not lower its full-year earnings target.


Even though the majority of student loans are highly rated and carry a federal guarantee, investor demand for securities backed by these assets has plummeted — a sign of just how nervous investors are about securities backed by mortgages, student loans and other debt.

It seems from the article that the problems are that money is tighter and Sallie Mae can't charge high enough interest rates to make these loans attractive to investors. I'm not sure that the latter is as relevant as the money squeeze however.

[YDogg]

2. I believe this is one of the most horribly under-reported stories coming down the pike.

I hope we don't have thousands and thousands of current & about-to-apply college students simply unable to attend because they will not be able to obtain loans. The affect on university budgets could be remarkable, let alone the affect on these students.

:-(

[InkAddict]

19. This is yet another elephant in the room...so, SHHHHush....

FAFSA and Lender's granted Stafford Plus loans to family-size-home owners(not necessarily McMansions either)that were leveraged against the time when downsizing to a condo would make sense, even taking into account that the home might lose some value. People lost homes due to a variety of circumstances that included long-term unemployment, serial unemployment, and family health-care crises that went inaccurately monitored (what is the real unemployment rate?) and unregulated in its cruelties to the families of the elderly unwell ("faith-based" really means hiding sinful greed and responsible benevolent actions with replacement Publican prayers).

Being unemployed longer than a rainy-day fund lasts or more often than one can create a satisfactory fund sufficient for the next RIF and/or having a high-cost illness in the family means bankruptcy, and that means one has no assets left to meet even the small unexpected problems of daily life (Mother Nature's tricks, a flat tire, a broken fridge that ruins your food supply, etc...) let alone a major problem, another RIF, a fire caused by something other than one's own negligence, another illness or serious auto accident with a drunk or uninsured driver.

For those that have been "treated" by the Friedman method and are nearing their "end of days," a cup of hemlock is the only sure method to avoid certain starvation and homelessness and/or wage-slavery for ourselves and the students and new graduates. If we are lucky enough to be able to work, they will collect their pound of flesh and leave us too little to attain basic necessities. It's the "free-trade" Friedman way of individual capitalism--THE RICH FIRST, ME NEXT and to hell with the workers and poor!

Our students and graduates won't be making us grandparents any time soon, they've already got their own loans risked against their own dreams and potential for success and their dependents--US. I don't think they'll see the potential and wonder in our hoary heads in quite the same way that they'd see their small spitting images.

Yes, poison would be best because one way or the other victimization by the violence of others, self-criminalization, or self-inflicted violence will be the only remaining pathways of the destitute. At some point, that 2% elite will either actually begin ripping each other's eyes out or join in summarily shooting us. A holocaust and/or biological purge of catastrophic proportions and a new Dark Age is inevitable on the present course.

Good luck!

[izquierdista]

5. Here's an idea!

Have the State run the college system. Call it socialized education, if you will, but each state could take over the colleges and universities and provide higher education to those who need it at little or no cost to the student. :think:

[Divernan]

8. When I lived in California in the '70's, the state universities were free.

Maybe I paid $20 a course in fees - very negligible costs. I'm talking about UCLA, UCSacramento, UCSanDiego, etc. In other words many, many students could live at home and commute to college.

[Divernan]

6. Obama's proposal re college costs:

From the Issues section of www.mybarackobama.com

(I just included the higher ed. portion. He has great analysis of problems and proposed solutions for all level of American education.)

The Problem:
Soaring College Costs: College costs have grown nearly 40 percent in the past five years. The average graduate leaves college with over $19,000 in debt. And between 2001 and 2010, 2 million academically qualified students will not go to college because they cannot afford it. Finally, our complicated maze of tax credits and applications leaves too many students unaware of financial aid available to them.

Barack Obama's Plan

Create the American Opportunity Tax Credit: Obama will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This universal and fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university and make community college tuition completely free for most students. Obama will also ensure that the tax credit is available to families at the time of enrollment by using prior year's tax data to deliver the credit when tuition is due.
Simplify the Application Process for Financial Aid: Obama will streamline the financial aid process by eliminating the current federal financial aid application and enabling families to apply simply by checking a box on their tax form, authorizing their tax information to be used, and eliminating the need for a separate application.
Barack Obama's Record
Record of Advocacy: Obama has been a leader on educational issues throughout his career. In the Illinois State Senate, Obama was a leader on early childhood education, helping create the state's Early Learning Council. In the U.S. Senate, Obama has been a leader in working to make college more affordable. His very first bill sought to increase the maximum Pell Grant award to $5,100. As a member of the Health, Education, Labor, and Pensions committee, Obama helped pass legislation to achieve that goal in the recent improvements to the Higher Education Act. Obama has also introduced legislation to create Teacher Residency Programs and to increase federal support for summer learning opportunities.

For More Information about Barack's Plan
Read the Pre-K to 12 Plan
Read the College Affordability Plan
Speech on Pre-K to 12 Education
Speech on College Affordability

[izquierdista]

15. The good old days

Maybe we should dust off the Goodwin J. Knight plan and the Edmund G. Brown plan. As you noted in another post, California really had it together before St. Ronnie the Addled showed how to ruin things on a state level in preparation for his destructive tenure at the federal level.

[PA Democrat]

7. PHEAA ( PA Higher Education Assistance Agency) suspended all loan activity

more than a month ago. How do people expect the next generation to compete in a global economy when only the rich will be able to afford college?

[marmar]

9. I think there's a similar situation in Michigan.....

.... There is something terribly wrong with this country, isn't there?
- V (V for Vendetta)

[Divernan]

10. PHEAA already had an obscene scandal before the current credit crunch

Google PHEAA scandal and you'll get 2,100 hits. Here's one chosen at random. I know some of the Dems on this board - one guy in particular would sell his grandmother to play golf at The Greenbrier.

http://pennsylvaniaprogressive.typepad.com/my_weblog/2007/03/the_pheaa_scand.html

This one is a state scandal and it's obscene. The Pennsylvania Higher Education Assistance Agency has been providing grants and loans for college students for decades. To give you a clue how long they've been around I got a small grant from then when attending Penn State back when the University was a small farmer's college (oops, no, that was when my parents attended). I suppose it was a bit bigger than that, but let's just say Joe Paterno was still a young coach.

PHEAA enables many young people to attend college by providing financial assistance. I wonder how many couldn't because these corrupt officials spent the money on luxury junkets through the NAPA Valley doing wine tasting ala the movie "Sideways." They stayed in better hotels and ate at better restaurants than Paul Giamatti and Thomas Haden Church. No, it was top of the line luxury all the way for PHEAA Board members.

This agency somehow became the example of how NOT to run government in Pennsylvania. Being appointed to its Board became a political plum and an excuse to spend tax funds like drunken sailors on leave. Most of these Board members, by the way, are state legislators. Surprise, surprise.

PHEAA fought attempts to make their records public with a ferociousness that's seldom seen by public entites. It tool 19 months for media outlets to go through court hearings and force PHEAA to comply. This is one more reason why we need a new Open Records Law and a stiffer Sunshine Act. Penalties for noncompliance need to be harsh. Nineteen months of obstruction by PHEAA before the public discovered it's excesses and waste is unconscionable.

Obviously PHEAA's Board had to approve this obstruction. At any time these 20 people could have stood up for the right thing and provided the documents. They refused. Meanwhile the records show the expenditure of $768,000 for meals, transportation, golf trips, spa treatments, and bar tabs. $768,000 that, therefore, wasn't available for grants or loans to needy college students.

Let's take a look at where these wasters of public funds took their retreats: the GREENBRIER RESORT in West Virignia, long a favorite of the rich and famous (to the tune of $185,000), the HOTEL DUPONT in Wilmington, famous for its French cuisine, and THE HOMESTEAD resort in Williamsburg, Virginia. Nice little perks folks. No wonder they fought so hard to keep this high living away from public scrutiny.



Here is a list of PHEAA's Board members:

Rep. William F. Adolph Jr., Chairman

Sen. Sean Logan, Vice Chairman (DEM)

Rep. Ronald I. Buxton(DEM)

Sen. Jake Corman

J. Doyle Corman (retired legislator)

Rep. Craig A. Dally

Sen. Jane Earll

Sen. Vince Fumo(DEM)

Sen. Vincent J. Hughes

Rep. Sandra J. Major

Rep. Jennifer L. Mann

Rep. Joseph F. Markosek(DEM)

Sen. Michael A. O'Pake

Roy Reinhard

Sen. James J. Rhoades

Rep. James R. Roebuck, Jr.

Rep. Jess Stairs

Sen. Robert M. Tomlinson

Secretary Gerald L. Zahorchak (Department of Education)

These are the people directly responsible for this scandal and outrageous waste of public money. As Board members it is their fiduciary responsibility to know what's going on and guard against waste and fraud. Of course, since they were the recipients of this luxurious largesse that didn't happen. PHEAA Board membership became a plum assignment in Harrisburg because of this fraud upon the citizens of Pennsylvania.

All money in the state treasury belongs to the people of the Commonwealth regardless of its origin. If PHEAA made money on its college loans those funds belonged to the people. They were not lottery winnings to be squandered on luxurious retreats for Board members. These Board members violated their fiduciary responsibilities by going on the retreats and voting to approve them. If they didn't vote to approve them they should have voted to refuse to allow this waste of public monies. In that they failed and they must be held responsible.

My state Senator Mike O'Pake released a statement this week saying he wasn't aware of these abuses. I wonder Mike, how could you have sat on this Board and not have been aware of this? I sit on a Board and I understand what our obligations and responsibilities are. This is shameful.

John Morgan on March 16, 2007 at 10:38 AM in Scandals | Permalink

[PA Democrat]

13. Agree. I've been following the scandal and think it's time to clean house.

Between this scandal and the credit crunch, this is a train wreck for people looking for help to get through school.

[InkAddict]

20. Either a) they don't (think, either) or ....

b)the next generation doesn't include YOUR children - the rich do procreate (or adopt) so as not to ruin their svelte trophy female's bodies

see: http://www.webmd.com/infertility-and-reproduction/features/womb-rent-surrogate-mothers-india

and to create heirs to their fortunes. These "special" children can be educated anywhere in the world that's best and "safest" and then will go on to crush their global competition including aging Mommy and Daddy.

[aikoaiko]

11. Come to GA: its free with if you can maintain a B average.

All GA high schoolers can get their tuition/fees paid for at state universities if they graduate with a B average or a transfer from another state has to pay for two semesters before GA picks up the tab. You even get a couple of hundred for books each semester.

Yep, I'm proud of GA for doing this.

[HockeyMom]

14. I got free tuition

by working (Admin. Asst.) full time at a college (NYU). All you had to do was maintain a C average.

Ok, the pay wasn't great, but think about the cost of tuition.

[Turbineguy]

18. It's actually quite simple....

Education is a money loser, building and running prisons is a money maker.

An educated population is a danger to a totalitarian government.

We can hire educated immigrants (who can be controlled) to handle the higher level work.

Why spend money on education so people can earn more money and get into the higher tax brackets where people pay less tax?

Now if you'll excuse me, I'll just duck out to the mall and buy something. It's either that or go to prison. I'm feeling rather patriotic today.

[NashVegas]

21. Colleges Are Training the World's Most Expensive Prostitutes, Nowadays

As businesses of all sorts have jettisoned training for all except those who are being groomed as future high-level managers, our colleges and universities have picked up the slack for training everyone else.

Colleges have become the places where the middle class pays to be trained for jobs; higher learning doesn't mean jack shit to the average student and it's becoming more and more apparent that the only safe jobs to spend $45k in training fees are the ones that can rain money for the financial elite.

I'd love to see all loan activity cease for all specialized degrees. Without the incoming rubes, not only would the schools freak out, but their corporate overlords would have heart attacks at the thought they may have to invest in their own future.