* * *
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.”
* * *
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.
It’s not uncommon to hear that the growth in student loan debt is like a time bomb threatening to blow up the U.S. economy. Now, you can watch it tick.
As the 2016 election cycle heats up, we suspect the debate over student loan forgiveness will become an ever bigger issue with the Hillary camp looking to woo young voters that aren’t quite as “enthusiastic” about her Presidency as they were about Obama’s. We also suspect that students, helpless “victims” of predatory lenders looking to give them $200,000 to pursue their dreams of becoming anthropologists while consuming copious amount of free beer at frat parties, will grow increasingly vocal in asking why the Nanny State would have given them so much money to pursue non-existent “careers”.
To put the student loan issue into perspective, there is roughly $1.3 trillion of student loans outstanding to 43mm Americans, an average balance of $30k per student. Roughly 16% of borrowers are currently in long-term default with outstanding balances totaling $125 billion, or an average balance of $18k per student.
“Checks were celebrated across the campus as almost like a bonus for being a college kid. [Students] would go directly to the bank to cash it. I bought electronics for my dorm room and drinks were on me for a month or two. In an abstract way, I knew I would have to pay it back. But you don’t have a timeline in your mind about what that was going to look like. I just knew it would happen later.”
* * *
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.
“Then I get a lecture (from the judge) about the United States and stealing from the government,“ he recounted. He was ordered to pay $5,700, including interest, for the original $1,500 loan. If he does not pay by March 1, he will be arrested again. He is also ordered to pay for the cost of his own arrest.
Houston, Texas — A Houston man was arrested last Thursday over outstanding federal student loan debt left over from nearly three decades ago. Though he owed only $1,500, seven U.S. Marshals wearing combat gear and wielding automatic weapons aggressively arrested him — and authorities have said they will serve many more arrest warrants for outstanding educational bills in the near future.
“They grabbed me, they threw me down,“ 48-year-old Paul Aker told the New York Daily News on Tuesday.“Local PD is just standing there.“
– Obama Administration Improperly Denies Student Loan Debt Relief (Huffington Post, May 8, 2015):
Federal law allows students who were defrauded by their colleges into taking out federal student loans to have their debts forgiven. The Obama administration has said repeatedly it will ensure aggrieved borrowers get this form of relief, a commitment that Education Undersecretary Ted Mitchell reiterated this week following the bankruptcy filing of troubled for-profit school operator Corinthian Colleges Inc.
But that’s not helping Yvette Colon of New York.
Colon, a 53-year-old East Harlem resident, says she is stuck with a worthless credential that’s saddled her with more than $51,000 in federal and private student loans. She attended Sanford-Brown Institute in Manhattan, a for-profit trade school owned by Career Education Corp., from 2006 to 2008, hoping to become a cardiac sonographer.
– Student Debt Accounts For Nearly Half Of US Government “Assets” (ZeroHedge, April 19, 2015):
“The gap would be made up with future tax hikes and/or cuts in spending. Those future taxes would be paid by successful millennials and their descendants, letting unsuccessful millennials off the hook,” Bloomberg notes, bemoaning the likely “solution” to America’s trillion dollar student debt bubble.
– “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.
– 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.