Tuesday, April 23, 2013

Student Loan Fairness Act: America - what have you wrought?!?

I'm not a subscriber to MoveOn.org but several friends are and they forwarded me a recent email from Robert Applebaum, a MoveOn member in Staten Island, who created a petition on SignOn.org.

You've never heard of Applebaum? He's the founder of an organization called StudentDebtCrisis.org.

The complete email is below, but here are a couple of excerpts:

Student loan debt now exceeds $1 trillion. Millions are buried under student debt, forced to put off major purchases and life decisions.

Put off major purchases?!? Oh, the humanity!

Let's put this in perspective: students voluntarily took on huge amounts of debt for schooling, choosing to borrow instead of working to pay for their college educations - you know, like of many of used to do.

They then graduate and have to begin paying off that debt. But, because they have financial obligations, they have to make choices and that means they can't go out and purchase a new car or a new TV, or a new anything because they're expected to cover this obligation before taking on others?

Why is that a bad thing? Isn't that called 'life' and part of being an adult?

The good news is that this week, legislation has been reintroduced in Congress that would provide student loan forgiveness to responsible borrowers drowning in debt.

How in the world can you be called a 'responsible borrower' if you are drowning in debt?

Wouldn't the fact that you are "drowning" in so much debt clearly indicate that you weren't very responsible about your borrowing in the first place?!?

The Student Loan Fairness Act would create a new "10-10" standard for student loan repayment, in which an individual would be required to make ten years of payments at 10% of their discretionary income, after which their remaining student loan debt would be forgiven.

So if I pay 10% of my "discretionary" income toward my loan for 10 years, I won't have to pay anything else on it forever?

What a bargain!

And why in the world would any college student, educated in today's schools that teach self-gratification and dependency on government, ever pay more? Why would they make sacrifices of 'major purchases' if they know they can skate by with paying only 10% of their discretionary income?

If all they have to pay is 10%,why pay more? That would be foolish!

And only 10% of their discretionary income?

That means they can spend as much as they want on a house or apartment, food, utilities, etc... They won't be forced to balance their desire for a larger place to live with their ability to pay all their financial obligations. They won't be forced to eat hamburger instead of steak for dinner. They won't be forced to wear sweaters in the winter or go without air conditioning in the summer in order to keep their utility bills lower.

In other words, they won't be forced to make the same decisions adults have always been forced to make, learning to balance their ability to pay with their wants and desires.

Is this really the lesson we want new adults in our (supposedly) productive society to embrace?

"Further, this legislation would...allow those eligible to convert their private loan debt into federal direct loans

Why? Why would we want students who have private loans to convert them to government loans? Would the bank that issued the private loans be paid off with tax dollars? And then the tax payers would never be paid back???

And what about our huge national debt? Won't putting more college students on the government rolls negatively impact the nation's debt?

What about the sequester? According to President Barack Obama, there's not enough money so he had to end tours of the White House - the people's house. We don't have enough money for air traffic controllers - clearly a vital service to the nation and our economy - but we have the funds to add more people to the government student loan program only to allow them to never repay the debt?!?

In what world would this ever make sense?

And yes, this definitely qualifies for 'stuck-on-stupid' designation!

Student loan debt causes an undeniable and significant drag on the economy. The Student Loan Fairness Act directly addresses this enormous boot on the neck of the middle class and represents a glimmer of hope for millions of Americans who, with each passing day, find that the American Dream is more and more out of reach.

It may be true that having to pay student loans causes a drag on the economy. The 'logic' is that having to pay back the money borrowed means the student isn't spending elsewhere, and without that elsewhere spending, the economy suffers.

What is never mentioned is the loss to the economy when the taxpayer, the original supplier of the funds, had to pay extra money to the federal government to provide the funds to be borrowed in the first place.

I had to forgo spending and helping the economy in order to pay taxes that are higher than necessary because of the need to fund this government program.

Now 'they' want to complain that repaying that money will hurt the economy? Providing the money in the first place hurt the economy - where was the concern for the economy then?

In a normal world, a student would get a private loan. Under this process, a bank would accept deposits from people in the community, pool those resources, loan the funds for various purposes, charge an interest rate and collect repayment over time.

The bank would then turn around and pay part of that interest back to the original depositors, who would then have additional funds to spend.

The government action distorts and perverts the normal process of money movement - and this act would corrupt the process even further, if that's actually possible.

So far over 200,000 people have signed the petition supporting the bill

Of course they have! They don't want to be responsible for the meeting the obligations they've incurred.

And why would they? We've grown generations who have been trained to believe that nothing is their fault; they are the victim of some evil entity; government will take care of them so they don't have to take care of themselves.

And this doesn't even get into the choice of majors with so many graduating from college with degrees that won't help them get a job or support themselves.

Nor does it delve into the Orwellian Newspeak (control the language) efforts of naming this horribly unfair and economic perversion the "Student Loan Fairness Act."

Oh, America, what have you wrought?

Here is the complete email:

---------- Forwarded message ----------
From: Robert Applebaum <moveon-help@list.moveon.org>
Date: Mon, Apr 22, 2013 at 4:20 PM
Subject: Support the new Student Loan Forgiveness Act

Below is an email from Robert Applebaum, a MoveOn member in Staten Island, New York, who created a petition on SignOn.org. Robert is also the founder of the organization StudentDebtCrisis.org.

Dear MoveOn member,
Student loan debt now exceeds $1 trillion. Millions are buried under student debt, forced to put off major purchases and life decisions.

In short, student loan debt has become the latest financial crisis in America. If we do absolutely nothing, the entire economy will eventually come crashing down again, just as it did when the housing bubble popped.
The good news is that this week, legislation has been reintroduced in Congress that would provide student loan forgiveness to responsible borrowers drowning in debt. So far over 200,000 people have signed the petition supporting the bill. Will you sign and share it with your friends?
The Student Loan Fairness Act would create a new "10-10" standard for student loan repayment, in which an individual would be required to make ten years of payments at 10% of their discretionary income, after which their remaining student loan debt would be forgiven. Further, this legislation would:
  • ensure low interest rates;
  • allow those eligible to convert their private loan debt into federal direct loans;
  • reward graduates for entering public service professions;
  • provide a lifeline for student borrowers who have fallen on difficult times;
  • encourage delinquent and defaulted borrowers to re-enter repayment;
  • replace the current, ten-year "Standard Repayment Plan" for the full amount of the loan balance with the "10-10" plan as the default repayment option for borrowers entering repayment.
Student loan debt causes an undeniable and significant drag on the economy. The Student Loan Fairness Act directly addresses this enormous boot on the neck of the middle class and represents a glimmer of hope for millions of Americans who, with each passing day, find that the American Dream is more and more out of reach. 
–Robert Applebaum, StudentDebtCrisis.org

This petition was created on SignOn.org, the progressive, nonprofit petition site. SignOn.org is sponsored by MoveOn Civic Action, which is not responsible for the contents of this or other petitions posted on the site. Robert Applebaum, StudentDebtCrisis.org didn't pay us to send this email—we never rent or sell the MoveOn.org list.

Want to support our work? MoveOn Civic Action is entirely funded by our 8 million members—no corporate contributions, no big checks from CEOs. And our tiny staff ensures that small contributions go a long way. Chip in here.


Mad Jack said...

I have a certain amount of sympathy for the students. They're 18, the vast majority have never lived away from home and none of them have ever made major decisions for themselves. Couple that with a loan salesman and the student will go into debt faster than the Ayatollah Obama can spend another billion on social services.

The solution is to restrict the age at which a student loan can be obtained to 21. By the time you're 21 years old, you've had a chance to think things through a little.

The immediate crises? Too bad. Tell the little darlings to pay the bread back. About the only thing I think the government should do here is make certain the interest rate on the loan is low; I wouldn't saddle anyone with a usury rate.

Unknown said...

you obviously have no idea what it is like to be in poverty. loans were the only way for me to get an education and when i finally graduated with a husband and 2 kids i made 6 dollars over minimum wage and was suppose to start repaying my loans. my new job meant daycare and gas driving to and from the city. it costs me more to go to school than just stay home WTF!!

Maggie said...

Actually Donna, I do. I worked 40 hours a week and went to school full-time in order to get my degree. I made sacrifices and went without a lot of thing in order to do that. I did take out a small loan and began paying it back immediately after graduation. I made paying off that loan a priority so I could then begin saving for a house.

I didn't make a lot a money at my job, just slightly above minimum wage - definitely less than the amount you say you're earning.

Now, I don't know you or your circumstance, but your choice to have kids was YOUR CHOICE. The fact that it complicated your ability to afford school and repay your loans isn't a fault of the American taxpayer that you should have your debt forgiven.

You made a conscious decision to have both kids and an education and you should be responsible for the consequences of making that decision.

Why should taxpayers foot the bill through an amnesty program or bailout of your loan???

As an aside, I do believe that the government loan program is atrocious, that the interest rates it charges are ridiculous and that it shouldn't exist as a government program. I also believe that interest on college loans, like mortgage interest, should be 100% deductible on your income taxes.

But I don't believe you should be let out of the obligation to repay the monies you borrowed. And neither should you.

dinosaurzzzzzzz said...

"In what world would this ever make sense?"

In the world where students took on those loans expecting to be able to pay them off with the jobs that no longer exist?

In the world where people end up with part-time minimum-wage jobs with no benefits to try to pay off tens of thousands of dollars in debt, and it doesn't work because their income is lower than the interest?

In the world where education is the most valuable thing that a person can have?

In the world where complete and total debt forgiveness would happen around once every twenty years for most of recorded human history because the unequal distribution of wealth causes severe social problems (such as poverty and starvation) that have become more systemic and widespread than they ever have before?

In the world that is literally reopening the debtor's prison?

In the world where people are more important than their paychecks?

In the world where social liberty is more closely tied to economic liberty than it ever has been before?

Why is it so important that college students live the same way that people did fifty years ago? Isn't the entire point of civilization and human progress the elimination of that hardship?

Why is this bill specifically Orwellian, as opposed to literally every bill that passes through the legislative system?

Maggie said...

Clearly the expectation of repayment still exists, does it not? Even with a bad economy and jobs that pay less than hoped. Why should a bad economy mean that you don't have to repay the loan?

If people were arguing for more time to pay the loans, that would be fine. But make a law that the obligation can be ignored if not repaid?

I would challenge you to prove that starvation and poverty are more widespread than ever before. And just because those two things exist, why does that mean any student should not have to pay back a loan that they voluntarily took and accepted as an obligation?

Nothing in my post says that people are less important than their paychecks...what in the world are you talking about? Are you somehow implying that people should be let out of voluntary obligations to repay debt because they're more important than the debt they agreed to repay? That makes no sense.

You've made a bunch of statements/questions that have no relevance whatsoever to the point that students have previously agreed to repay the debt. They made decisions along the way (either in the amount of money to borrow, the type of schooling they attended, whether or not they worked while going to school to reduce their loan needs, their choice of a major - which may result in less earnings than others, etc...) that they should have to live with.

The loans should be repaid. They came from the taxpayers who have had to go without something in order to pay the taxes to government to fund the program. What about them? What about their lives and wants and desires? Especially since many of them also took out loans for various things and PAID THEM BACK without asking to be bailed out.

The world we live in still values an individual who meets their obligations - not one who tries to skate out on it because times are tough.

As an aside, the Orwellian aspect is the name. There is nothing 'fair' in this bill - it's just a bailout like the government did of the banks and the auto companies.

The banks will be out funds, the taxpayers will be out funds and the students will be deprived of a valuable life lesson on meeting their obligations. Nothing in that is 'fair.'

Mad Jack said...

I do, in fact, know what it's like to live in poverty. I also know what it's like to be heavily in debt with a low income job. Now then.

Who got me in debt? I did. Who went without to pay off that debt? Me, that's who. Who paid the loan off early so they could enjoy a little more of that money? Me. I paid it off early and saved myself a little money on the vig.

It wasn't fun, and it wasn't easy, but it got done.

In your case, you were the one who decided to have children - not me. You.

Unknown said...

No one wants higher taxes. But lets face it, if we don't do something about this debt crisis now - things will just get worse.

I don't mind paying my student loans but after being laid off TWICE because two companies I was working for went belly up... I forced myself to a lower salary position for my third job, which I miraculously snagged.

kinda sucks, since I can't write an awesome essay about how awesome I am for being so awesome and responsible - to bash on others who suffer because of circumstances out of their control. eh.

Maggie said...

Actually, kshimaka1, I applaud you for taking responsibility for your loans and not expecting others to pay them off for you.

Thank you for being responsible, even though, as you said, it sucks.

I guess that's the point. It's not a lot of fun. It's an obligation and your willingness to do what it takes, including a lower-paying job, is the type of attitude I was talking about.

You are to be commended.

And there is nothing in my post that says I'm awesome, but I do value personal responsibility and have no patience or tolerance for a society that doesn't.

I don't bash people for circumstances beyond their control, but taking responsibility for a loan you willingly enter into - and not expecting a bailout simply because the economy is terrible - is a behavior that EVERYONE should encourage ... and we should discourage any program or such that destroys that concept of personal responsibility.

Additionally, I believe the current way student loans are run is horrible and agree with others that the full amount of the interest on them should be deducted.

I also wonder why states like Ohio outlaw "predatory" pay-day lending loans, but have no opposition to what is most certainly a "predatory" student loan program.

Rather than bash me or ask for a bailout - how 'bout pushing politicians to fix the problem?!?

Unknown said...

Bankruptcy and Foreclosures/Short Sales are two ways in which an individual who is no longer able to pay his/her debts is given the ability to start fresh. The run up in home prices, along with the increase in rental prices and the higher cost of an education is creating an entire generation that is poorer than the last. Look at the price of gas. You worked for minimum wage, but that wage bought you more than it does today. Seriously. Things have changed, wages have stagnated and jobs are much harder to find.

Unknown said...

Who got me in obligation? I did. Who headed off without to pay off that obligation? Me, that is who. Who paid the credit off promptly so they could appreciate a little a greater amount of that cash? Me. I paid it off right on time and safeguarded myself a minimal expenditure on the vig Student loan help .

Maggie said...

Kristin Lakoma wrote:

Things have changed, wages have stagnated and jobs are much harder to find.

No one disputes that fact...but there have been changes in the economy in the past. In the 1970's interest rates were in the double digits. Does that mean that you should no longer be responsible for your obligations and that other Americans, who have NOT incurred your same obligations, should foot your bills for you? NO>

Decisions are made all along the way by the individuals who take out loans: do they take out the maximum amount even though they don't need all they are eligible for; do they work part-time while going to school to limit the amount of borrowing; do they not go to school full-time and take longer to get their degree in order to be able to work and not borrow; do they choose a major that will give them a better opportunity at employment?

Do they decide to major in theater and then wonder why they're not making enough money to pay off their loans? Do they decide to get married and have kids while they still have debt they haven't paid off?

Certainly all these decisions are their own decisions to make. But they must live with the consequences of those decisions and not expect that the American taxpayer will pay their bills (or forgo repayment of their obligations) simply because they made decisions which now make it more difficult for them to pay back their loans.

Don't get me wrong, I'll repeat AGAIN that I think the federal government shouldn't be involved in the student loan business - that it's akin to a truly predatory loan and probably qualifies under the definition of usury. But that just means that people who are having trouble with the loans need to work to make the interest fully deductible on their income taxes and to make the interest rates competitive with a free market.

It doesn't mean that should work to eliminate their obligations, especially when doing so means that other people (taxpayers) end up footing the bill.

Maree said...

I understand your sentiment, that "kids these days" are lazy and don't work hard and carry through on responsibilities. I am often disgusted by peers lack of work ethic.

However, you're missing something huge in your argument: numbers. Both of my parents tell me they worked through college and were able to pay of the small loan (in the 1970's, about $1,500) they took out in 1-2 years.

I am 28 years old and I am a teacher. I worked hard to get here- it's been grueling to make it-- at one time I had three jobs in addition to school(2 were part-time, obviously). Now, I teach Monday through Friday and make a small wage. Since I teach at the college level, I am only part-time and get paid for teaching hours only. Nowadays, most full time positions have been replaced with part-time--- this way the school doesn't have to provide benefits. I waitress Saturdays and Sundays to pay my bills. That puts me at 7 days/week for work. I've had 3 days off in the last 85.

So, I'm tired. And you know what.... I owe $35,000 in loan debt. I pay and I pay... and it's hard to actually get at the principal-- the interest rate is high. It's like I bought a Mercedes or something. That's how I'm being punished for wanting to get an education. What can a young person do today without an education?

And now- it's even worse. College tuition rises every semester--- and I'm not talking about 1 or 2%. I remember a semester where there as outrage in California-- schools were upping it as much as 30%. This doesn't reflect the rise in income. So, while the Student Loan Fairness Act may not be the best solution... don't blame the victims here-- blame the government and the greed there for getting us into this mess.

Maggie said...

Maree - I was with you right up until you called these adult "victims." You (the generic - not you specifically) are not a victim when you incur debt and then decide it's too hard to pay it back so you want others to foot the bill for you.

The real "victim" in that scenario is the taxpayer who ends up having to pay more in taxes so some (definitely not all) college kids can pretend to be victims and get out of their obligations.

Victimhood has become a near profession these days with just about everyone being told they don't have to be responsible for numerous things because of it. That's more wrong than even the government!

I admire your persistence in working to meet your obligations.

And I agree that the entire student loan program is a mess.

But the solution is not to demand the end of the obligations to repay because that just means that the taxpayer is out the funds - not some nebulous 'government' ...

As I've said repeatedly, make the interest 100% deductible and get the government out of the loan business in the first place! It's more predatory than the pay-day lending practices my state of Ohio has outlawed!

Does anyone really think that forgiving all debt after making only a token repayment effort is going to make the student loan program stronger?????

All that will do is encourage more irresponsible lending of even more money that will never be repaid. That's a recipe for an even bigger disaster.

Also, don't tell kids they should get an education just to get an education. Teach them the value of the education - and the cost - and all out ROI (return on investment) so they are prepared with a job/employment that gives them the ability to honor their obligation for repayment.

There are a lot of things that can be done, but I will blame the students when their choice is to support irresponsible borrowing with an expectation that, because times are tough, they shouldn't repay. Such individuals are not 'victims.'

Unknown said...

I agree. She sound like she is talking out
Of her bottom. Living in a place where no matter how hard you work, you still cannot get there. You can't afford more because you cannot get better jobs with a bachelors anymore. But you can't get your transcripts because school doesn't let you try.

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