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Just days after reports emerged that student loan defaults are soaring, which is undoubtedly due to some combination of, among other things, poor job prospects for the millions of snowflakes who graduate each year with their $200,000 educations in anthropology and the moral hazard created by liberal politicians constantly calling for student debts to be ‘forgiven’ (a.k.a. forcefully jammed down the throats of taxpayers), the Trump administration has revoked rules put in place by Obama that barred student debt collectors from charging penalty fees on past-due loans.
Originating from the Department of Justice, the “Dear Colleague” letter (full letter included at end of post) says that Obama’s unilateral rules implemented in 2015 could have “benefited from public input”…but what good is being King if you can’t unilaterally force new laws on the masses? Per the Washington Post:
H/t reader squodgy:
“And so it ends.
This could go pear shaped if parents guaranteed the loans.”
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This will surely end well!
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The Department of Education recently released a memo admitting that repayment rates on student loans have been grossly exaggerated. Data from 99.8% of schools across the country has been manipulated to cover up growing problems with the $1.3 trillion in outstanding student loans. New calculations show that more than half of all borrowers from 1,000 different institutions have defaulted on or not paid back a single dollar of their loans over the last seven years.
Joining the ranks of “broke lawyers” who can cancel their student debt, “Americans with disabilities have a right to student loan relief,” now according to Ted Mitchell, the undersecretary of education, said in a statement. Almost 400,000 student loan borrowers will now have an easier path to a debt bailout as Obama primes the populist voting pump just in time for the elections.
The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter.
Over 40 percent of those in student loan programs have stopped making payments. Many borrowers have never made any payments.
The department of education (a useless body that I would eliminate in one second if given the chance), cannot figure out why this is happening.
“We obviously have not cracked that nut but we want to keep working on it,” said Ted Mitchell, the Education Department’s under secretary.
The Wall Street Journal reports More Than 40% of Student Borrowers Aren’t Making Payments.
Hot off the presses, the US government just published its audited financial statements this morning, signed and sealed by Treasury Secretary Jack Lew.
These reports are intended provide an accurate accounting of government finances, just like any big corporation would do.
And once again, the US government’s financial condition has declined significantly from the previous year.
– 7 Million People Haven’t Made A Single Student Loan Payment In At Least A Year (ZeroHedge, Aug 22, 2015):
Perhaps it’s all the talk about across-the-board debt forgiveness or maybe the total amount of outstanding student debt has simply grown so large ($1.3 trillion) that even those with no conception of how much money that actually is realize that it’s simply never going to paid back so there’s no point worrying about, but whatever the case, the general level of concern regarding America’s student debt bubble doesn’t seem to be at all commensurate with the size of the problem.
And it’s not just the sheer size of the debt pile that’s worrisome. There’s also the knock-on effects, such as delayed household formation and the attendant downward pressure on the homeownership rate, and of course hyperinflation in the rental market.
– “Staggering” Student Loan Defaults On Deck: 27% Of Students Are A Month Behind On Their Payments (ZeroHedge, April 15, 2015):
A new St. Louis Fed study finds that the delinquency rate for student borrowers in repayment is 27.3%, meaning nearly one in three of the Americans laboring under a debt load that has now swelled to $1.3 trillion are more than a month behind on their payments. Ackman says there’s “no way they are going to pay it back.” We can hear the “cancel the debt” cries now.
– Every young person should see the Fed’s startling numbers on student debt (Sovereign Man, March 30, 2015):
What I’m about to tell you is not my own opinion or even analysis. It’s original data that comes from the United States Federal Reserve and national credit bureaus.
- 40 million Americans are now in debt because of their university education, and on average borrowers have four loans with a total balance of $29,000.
- According to the Fed, “Student loans have the highest delinquency rate of any form of household credit, having surpassed credit cards in 2012.”
- Since 2010, student debt has been the second largest category of personal debt, just after a home mortgage.
- The delinquency rate for student loans is now hovering near an all-time high since they started collecting data 12 years ago.
- Only 37% of total students loan balances are currently in repayment and not delinquent.
The rest—nearly 2 out of 3—are either behind on payments, in all-out default, or have entered some sort of deferral program to delay making payments, with a small percentage still in school.
It’s pretty obvious that this is a giant, unsustainable bubble (more on this below). But even more important are the personal implications.
– Next Mega-Bailout On Deck: White House Studying “New Bankruptcy Options” For Student-Loan Borrowers (ZeroHedge, March 10, 2015):
It appears that just as the administration is finally figuring out what HFT is, it also decided to take a look at the charts above and has made a decision: the next bailout is about to be unveiled, and it will involve a “streamlined” bankruptcy law allowing students to discharge their student debt.
– 18 Sobering Facts About The Unprecedented Student Loan Debt Crisis In The United States (The American Dream, Oct 7, 2014):
The student loan debt bubble in America is spiraling out of control, and it is financially crippling an entire generation of young Americans. At this point, the grand total of student loan debt in the United States has reached a staggering 1.2 trillion dollars, and an all-time record high 40 million Americans are currently paying off student loan debts. Just when our young people should be planning on buying homes and starting families, they find themselves financially paralyzed by oppressive levels of debt. What makes all of this even worse is that only some of our college graduates are able to get the “good jobs” that we promised them. So with limited job prospects and suffocating levels of debt, this generation of young Americans is increasingly putting off major life commitments such as buying a home and getting married. As a society, we really need to rethink how we are “educating” our young people, because what we are doing now is clearly not working. The following are 18 sobering facts about the unprecedented student loan debt crisis in the United States…
– Obama Unveils Student Loan Debt Bubble Bailout (ZeroHedge, June 9, 2014):
“The challenges of managing student loan debt can lead some borrowers to fall behind on their loan payments and in some cases even default on their debt obligation,” notes the always astute White House… and so it’s time to do something about that… by bailing the bad debtors out with US taxpayers money. As we have been vociferously warning, not only has the student loan debt bubble expanded massively (as the easiest credit substitute for real-world working and unemployment) but delinquencies on the ‘easily available’ credit is soaring with “consequences such as a damaged credit rating, losing their tax refund, or garnished wages.” Consequences, as we have been taught now, are not acceptable for this administration and so President Barack Obama will issue an executive action on Monday aimed at making it easier for young people to avoid trouble repaying student loans.
– Student Loans Soar To Record $1.111 Trillion, Up 12% In Past Year (ZeroHedge, May 13, 2014):
We have covered the topic of the student loan bubble extensively in the past so we won’t waste more digital ink on where it comes from or what it means for the troubled US consumer, suffice to report that according to the Fed, in Q1 total Federal student loans rose by another $31 billion to a record $1.11 trillion, and up a whopping $125 billion, or 12% from this time last year.
– Flood Of Students Demanding Loan Forgiveness Forces Administration Scramble (ZeroHedge, April 22, 2014):
“Loan forgiveness creates incentives for students to borrow too much to attend college, potentially contributing to rising college prices for everyone,” is a study’s warning over government plans that allow students to rack up big debts and then forgive the unpaid balance after a set period. As WSJ reports, enrollment in student debt forgiveness plans have surged nearly 40% in just six months, to include at least 1.3 million Americans owing around $72 billion. The administration is looking to cap debt eligible for forgiveness, as President Obama’s revamped Pay As You Earn scheme has seen applications soar and is estimated to cost taxpayers $14bn a year. The ‘popularity’ of the student loan bailout plan surged after Obama promoted it in 2012, and now the administration must back-track as costs have massively outpaced government predictions.
We have been aggresively focused on the government’s blowing of the student loan bubble…
– American students are well over $1 trillion in debt, and it’s starting to hurt everyone (TIME, Feb 26, 2014):
American students are well over $1 trillion in debt, and it’s starting to hurt everyone, economists say
Chris Rong did everything right. A 23-year-old dentistry student in New York, Chris excelled at one of the country’s top high schools, breezed through college, and is now studying dentistry at one of the best dental schools in the nation.
But it may be a long time before he sees any rewards. He’s moved back home with his parents in Bayside, Queens—an hour-and-a-half commute each way to class at the New York University’s College of Dentistry—and by the time he graduates in 2016, he’ll face $400,000 in student loans. “If the money weren’t a problem I would live on my own,” says Rong. “My debt is hanging over my mind. I’m taking that all on myself.”
– Student Loan Rates Set To Double On July 1 (NPR, June 28, 2013):
The interest rate on government-backed student loans is going to jump from 3.4 percent to 6.8 percent Monday.
Republicans, Democrats and the Obama administration could not agree on a plan to keep it from happening. Lawmakers say a deal is still possible after the July 4 recess. But if they don’t agree on a plan soon, 7 million students expected to take out new Stafford loans could be stuck with a much bigger bill when they start paying the money back.
– Fed Shocked To Find Student Loans Used For Anything But To Learn (ZeroHedge, June 24, 2013):
Since January, under pressure from the Fed, the Education Department has flagged 126,000 applicants attempting to pocket federal loans and grants without any intent of going to school. As the WSJ reports, officials are cracking down on fraud in student-aid programs after evidence of recipients – acting alone or as part of organized crime rings – misusing funds. “What we find are very poor students academically that are borrowing to the max, getting the maximum in their Pell grant and just going from school to school,” noted one director of financial aid, with roughly $829 million in Pell grants as “improper payments,” in the last year. Rather stunningly, more than 34,000 participants in crime rings improperly received federal student aid last year, up 82% from 2009. “We started seeing student borrowing that was just over the top with no explanation for why,” another director noted, adding “it’s not so much about the education, it’s the money.”
Most federal student aid requires no credit check and comes with few restrictions on how the money is spent and Federal officials say the Internet has helped fuel student aid fraud.
Via The WSJ,
Federal officials are cracking down on fraud in student-aid programs, responding to evidence that a growing number of recipients—acting alone or as part of organized crime rings—are pocketing federal loans and grants without any intent of going to school.
Since January, the agency said it has flagged 126,000 applicants, about 1% of all those seeking aid for the 2013-2014 school year.
– The Student Loan Delinquency Rate In The United States Has Hit A Brand New Record High (Economic Collapse, May 29, 2013):
37 million Americans currently have outstanding student loans, and the delinquency rate on those student loans has now reached a level never seen before. According to a new report that was just released by the U.S. Department of Education, 11 percent of all student loans are at least 90 days delinquent. That is a brand new record high, and it is almost double the rate of a decade ago. Total student loan debt exceeds a trillion dollars, and it is now the second largest category of consumer debt after home mortgages. The student loan debt bubble has been growing particularly rapidly in recent years. According to the Federal Reserve, the total amount of student loan debt has risen by 275 percent since 2003. That is a staggering figure. Millions upon millions of young college graduates are entering the “real world” only to discover that they are already financially crippled for decades to come by oppressive student loan debt burdens. Large numbers of young people are even putting off buying homes or getting married simply because of student loan debt.
– Student Loan Bubble? Just Discharge It (ZeroHedge, May 28, 2013):
By now everyone knows that the biggest portion of US household debt, besides mortgage debt, is a towering $1+ trillion in student loans, more than total outstanding credit cards or car loans, which is problematic for three main reasons: it is increasing at an unprecedented pace due to lax Federal lending standards, delinquent loans are soaring and are now well over $100 billion and rising at a pace of tens of billions each quarter, and it can not be discharged. At least that is conventional wisdom. But while points 1 and 2 are indisputable (and deteriorating), it is point 3 that is the more troubling for an entire generation of young men and women who are afraid to splurge on levered purchases such as houses due to an already insurmountable debt overhang, and a job market that is hardly hospitable to young entrants. Luckily, there may now be solution stamped in US case law.