IT IS ANOTHER ASSAULT ON TAXPAYERS AS EDUCATION FRAUD AND BAD BANK BUSINESS IS HANDED TO TAXPAYERS!!
I wanted to talk in depth about these schemes of student loan forgiveness. We have real progressives pushing a return to the ability to discharge student loans in bankruptcy and then you have the Third Way corporate approach that brings a bank bailout and tons of money to the affluent.....again. Remember, Bush took student loans from the public sector where loans were made to low-income families with much success. It propelled many working/lower class families into the middle-class. Along comes Bush and as was done with Freddie and Fannie the low-income housing agency that was blown up by subprime loans and now services $700,000 houses.....these student loans were handed to private banks with financial aid officers pushing students into these private loans just as the mortgage agencies were pushing the working class into mortgages they could not afford. Bush also changed bankruptcy law knowing that most students would be unable to pay....as with housing to not allowing students to discharge these private loans in bankruptcy. At the same time Bush allowed for-profit education businesses to go wild with public financial aid and we now know that as much as 70% of for-profit education student loans are fraudulent. They did to these students what they did to the subprime mortgage families.Remember, the banks have always made it their duty not to lend money to people unless they are thought able to repay the money. That was when banks were separated by the Glass Steagall Wall of investment. Now, with the banking/investment wall broken the banks are crazy and becoming wealthy on simply moving loans of any kind. So, give a working class student $100,000 worth of student loans......THEN THE BANKS NEED TO DISCHARGE THEM IN BANKRUPTCY AS NO ONE WOULD THINK SOMEONE SHOULD HAVE THAT MUCH DEBT!!!!
Much of the $1 trillion in student loan debt is tied to this behavior.
Here is the second piece. The wealthy knew about this student loan scam and they also knew Congress would pass a Student Loan Forgiveness Act that moves all private bank debt to the Federal government and then allows students to discharge all debt after 10 years of paying a percentage of income. So, a student loan bill that discharges student debt in bankruptcy wouldn't work for these affluent families because they have the money.....that is why this second Student Loan Forgiveness Act came into play. This Act gives the middle/lower class almost no financial help in student debt but it gives affluent students who have $200,000-300,000 in debt loads of debt forgiveness. You go to Harvard and the taxpayers will pay most of your college debt. Go to University of Baltimore and none of your debt will be paid.
WE ARE DEALING WITH REAL LYING, CHEATING, STEALING UPPER CLASS POLITICIANS FOLKS.....THEY STOP AT NOTHING.
The next part of the legislation addresses the fact that the 1% want the middle/lower class tied to online colleges they are working hard to create. By attaching a rule in this legislation that financial aid will in the future be tied to cost effective education programs you see they are setting the stage for all children from average families attending these online college/career classes and not state universities like U of Maryland or U of California Berkley and forget private universities. Don't forget that Pell Grants are also disappearing. These are the two ways the middle/lower class have funded education outside of scholarships.
STUDENT LOAN FORGIVENESS ACT-------THE BANKS GET A BAILOUT.......THE AFFLUENT GET A BAILOUT......THE MIDDLE/LOWER CLASS PAY THEIR WAY AND GET RELEGATED TO A SECOND-CLASS EDUCATION.
Regarding the Student Loan debt crisis:
What Applebaum and pols pushing this Student Loan Forgiveness Act are doing is bailing out the banks who have reaped billions in high interest and fees for this past decade on these private loans and now want to shed what they know students can't pay....so this bill moves all this debt from private to public taxpayers. Remember, all those subprime loans that landed in taxpayer Freddie and Fannie.....same thing. Don't forget this includes 70% of for-profit college tuition that has been found to be fraudulent. Private banks gave students loans of up to $60,000-150,000....WHO WOULD DO THAT? THEY NEED TO BE EXPELLED THROUGH BANKRUPTCY WHICH IS WHAT PROGRESSIVE POLS HAVE PROPOSED......
HR.532 Private Student Loan Bankruptcy Fairness Act of 2013
To amend title 11 of the United States Code to modify the dischargeability of debts for certain educational payments and loans.
Do you know that parents having students in elite universities have opted to finance their children's tuition through these private student loans rather than pay with the cash they have because they knew this bill would be put forward? The average student $20,000-30,000 in debt will get little relief while the affluent families will write off huge amounts of student debt. Also, this bill ties future student financial aid to cost effective education.....code for online education. The tiered access to education is tied to where students must go in order to receive this tuition aid.
Remember, they are defunding Pell grants and state support to public universities because they have yet to recover tens of trillions of dollars in corporate fraud over just a few decades. These cuts and policies are meant to replace the money stolen through corporate fraud!!!
THIS BILL HURTS THE MIDDLE/LOWER CLASS AND BAILS OUT THE BANKS AND THE AFFLUENT. PUSH FOR THE STUDENT LOAN BANKRUPTCY BILL!!!
Below is an article that addresses these concerns....it was written a year ago when all this was proposed!!
Taxes | 4/25/2012 @ 8:47PM |5,176 views Student Loans - Beyond The Interest Rate Debate
Congressman Clarke wins no prize from StudentLoanJustice.org.
President Obama is arguing to keep the interest rate on a class of student loans from increasing. Alan Collinge is hunting bigger game, a complete systemic reform. A recent proposal for a forgiveness program just does not cut it in his view. Here are his thoughts.
Freshman Congressman Hansen Clarke (D-MI) recently introduced HR 4170: The Student Loan Forgiveness Act. The legislation has received quite a lot of media attention, and strong support from well-networked groups on Facebook, and other platforms. Unfortunately, the bill looks far less like a forgiveness plan, and far more like yet another repayment/earned benefit plan combined with a bailout for banks who made highly risky loans without sufficient underwriting. Unfortunately, I have to give it an unequivocal “thumbs down” from the citizen’s perspective. Here is my take:
The Bill: HR 4170 aims to accomplish a number of goals for student borrowers, including the creation of a new, 10-year forgiveness program, a permanent 3.4% cap on the interest rate for federal loans, a reduction in the length of the Public Service Forgiveness program from 10 years to 5, and the creation of a mechanism by which the Government purchases private loans, and brings them into the federal program.
I have all of the same reservations with the 10-year repayment plan that I’ve written about elsewhere in the past. Like the other repayment programs, this is fraught with risk, uncertainty, and clear downsides that could and certainly will prove to be life-wreckers for many, all things being equal.
Of particular concern: The Department of Education would absolutely attempt to kick as many people out of this program as possible to avoid having to forgive the large amounts that they would be liable for (Google “disability discharge”, and “Department of Education” if you have any doubts about the Department’s track record on granting discharges for other reasons). As such, the completion rate of this or similar programs (like the existing IBR and PSLF programs) will ultimately be very small.
How Small?For example…earned benefits that banks and credit card companies routinely offer to their borrowers (ie interest rate reductions for ontime payments, etc) have a success rate of about 15%. For federal student loans, this is not going to get it done for the people. Not even close. In the presence of bankruptcy protections, I would have more faith in the current and proposed repayment programs, but not in their absence. Not by a longshot.
What should concern the public generally about this bill is that it does nothing to address the systemic problems with the lending system such as inflation, predatory foundations in the absence of consumer protections, systemic corruption, and others.
Also, because of a maximum forgiveness on principal of $45,000 for new loans(consolidation loans, for example), this would not be very helpful for people with defaulted loans with large balances, and large fees attached.
What really angers me as an “Occupier” who is sick and tired of seeing the banks come out of every cesspool they create smelling like roses: a private loan purchasing program in the legislation that is essentially another bank-bailout by which the lenders can get full book value (plus penalties and fees) for their worst performing loans. This is disgusting to me as a citizen.
I also have reservations about this from the borrowers perspective: I have heard others voice hesitancy about “federalizing” their loans because of the absence of consumer protections, strong collection powers of the government, etc. I agree with those concerns- they are not trivial.
Also very concerning- and this is why trying to codify a repayment program like this is so difficult- is the means for “paying” for this legislation. This bill calls upon a little known DOD fund used for overseas contingency operations (OCO) to pay for the costs associated with this legislation. This fund has had as little as $0.2 billion and as much as $168 billion in it in various years that I could find. This raises a plethora of new questions, and problems that you can imagine. This is beyond shaky.
The problems with this legislation really only underscore the need to restore bankruptcy and perhaps other fundamental consumer protections to student loans. The Department of Education would be far more likely to come up with a good workable set of forgiveness programs with fundamental protections in place. Conversely, history (decades of history) clearly demonstrates that the Department will not do anything to help students in their absence.
So I’m unfortunately having to call this bill a dog that won’t hunt for the citizenry. If someone steps up to argue for actual student loan forgiveness, there certainly is a strong, surprisingly realistic argument to be made for that, but we haven’t heard it yet from the politicians, advocates, or anyone that I have read to this point. This is unfortunate.
Alan Collinge is the founder of StudentLoanJustice.org.
We need to hold the banks responsible for yet another misuse of the loan system in pursuit of profit. Bankruptcy brings into play economic hardship and will allow students who are really hurting to discharge while those affluent students able to pay will do so.
We also need to look at the for-profit education businesses in who pays for these bankruptcies. Banks will go after these businesses to help defray costs!
Bankruptcy, Not Forgiveness, for Student Loans
December 7, 2012 - 3:00am By Jenna Ashley Robinson
Inside Higher Ed
Student loan debt is soaring. Since 1999, average student loan debt has increased by more than 500 percent, and in 2010, it exceeded outstanding credit card debt for the first time in history. Total outstanding student loan debt, by some counts, exceeded $1 trillion this year.
While many approaches have been taken to the problem (trying to cut university costs, for example), there seem to be just two proposals for lessening the burden on the students themselves. These are to allow the loans to be discharged in bankruptcy or to forgive the loans altogether. Both have been the subject of Congressional bills.
Only one of these has the proper long-term incentive effects, and even it should be hedged with some restrictions: restoring limited bankruptcy protection. That is, students should be allowed to get out of their student loan burden as part of bankruptcy proceedings, just as they are able to get out of car loans now. However, this option should be restricted to private loans and should be allowed only after a set amount of time, such as 5 or 7 years, as it was prior to 2005.
While Senator Dick Durbin (D-Ill.) has proposed the idea of restoring bankruptcy protection for borrowers of private student loans several times, it has gone nowhere. Instead, there’s a growing chorus in favor of loan forgiveness. U.S. Representative Hansen Clarke (D-Mich.) introduced H.R. 4170, the Student Loan Forgiveness Act of 2012, earlier this year.
The law would allow students to pay just 10 percent of their discretionary income for 10 years, whatever their total loan amount; then, the remaining debt would be canceled. This is the “10-10 standard.”
In addition, under this bill, the current 3.4 percent cap on undergraduate student loan interest rates (enacted by Congress as a temporary measure) would be made permanent. Private borrowers whose educational loan debt exceeded their income would be allowed to convert their private loan debt into federal Direct Loans, and then enroll in the “10-10” program.
A critical part of the bill is to reward graduates for entering public service professions -- like teaching and firefighting -- with even greater forgiveness. Already, under the Public Service Loan Forgiveness, some graduates can have their loans forgiven if they work in public service for ten years. Few students use the current programs, however, because the rules dictating structure of repayment are relatively restrictive, as Inside Higher Ed recently reported.
The Clarke bill would lower the public service requirement to five years. Similarly, medical graduates would be rewarded for working in underserved communities by reducing the service requirement to 5 years from its current 10 years.
While this bill would benefit the small proportion of students who have extremely high debt levels, it would enormously distort incentives for students and universities -- causing larger problems in the long run.
The problem is that loan repayments will be the same whether students borrow cautiously to attend a state school or borrow extravagantly to attend an exclusive private university. Their payments will be capped at 10 percent of discretionary income for ten years. Because future students will know about the option of loan forgiveness, it will destroy any incentive for them to borrow prudently. They will have no reason to consider the varying costs of higher education.
Their unfettered willingness to borrow will have a ripple effect. Because the federal government will ante up (until it runs out of money), more and more money will flow to the schools through these loans, spurring them to continue to raise tuition and minimizing pressure on cutting costs. (Greater demand typically leads to higher prices.) Students would be simply middlemen -- passing government largesse on to colleges and universities that can’t stop their habit of seeking revenue wherever possible.
Limited bankruptcy protections would send a better message to both graduates and lenders. In 2005, Congress prohibited private student debt from being discharged through bankruptcy, except in rare cases. Government student loans have not been subject to bankruptcy protection since 1976, when Congress exempted them following reports that new doctors and lawyers were filing for bankruptcy to avoid paying student loans.
Indeed, if bankruptcy were available, many young graduates -- who often have no major assets such as a house or a car -- would be tempted to walk away from loan obligations. The federal government lends money to any student who meets minimum standards; it does not evaluate whether the student is likely to pay the money back.
Thus, restrictions are needed to make bankruptcy “work.” First, there should be a waiting period before students become eligible for bankruptcy protection -- perhaps five years after beginning to make payments on student loans.
Second, only loans from private lenders would be dischargeable through bankruptcy. The famous cases of student debt in the $100,000-plus realm tend to include large amounts of private loans. Lenders were able to rely on federal laws preventing bankruptcy -- so the sky was the limit. Federal loans, on the other hand, are capped at $31,000 for dependent undergraduates and $57,500 for independent undergraduates.
By making private loans dischargeable in bankruptcy, there would also be a ripple effect -- a good one. Lenders would become much more cautious. They would actually consider the likelihood that the student would be able to pay back the loan. Instead of relying on government policy to guarantee their profits, banks would have to return to time-tested, responsible banking practices. In the end, fewer students would take private loans and total debt would decrease.
Current student loan policy has led young people down the wrong path -- away from frugality and prudence to profligacy. It’s time to start sending better signals.
Inside Higher Ed
WHEREAS THE CURRENT LEGISLATION WILL CAP THE LOAN FORGIVENESS AT $45,000.......FOR CURRENT LOAN FORGIVENESS THERE IS NO CAP!!!!
October 16, 2012
Obama's Loan-Repayment Plan Will Be 'Windfall' for Wealthy, Report Says
By Michael Stratford
The Obama administration's changes in the income-based repayment program for federal student loans will offer only marginal benefits to low-income borrowers but will be a boon for high-income borrowers who have big debts, according to an analysis released on Tuesday by the New America Foundation.
The program allows borrowers of federal loans to cap their monthly payments at a percentage of their annual discretionary income and have the loans forgiven after making payments for a certain period of time. Under the current rules, borrowers must pay at least 15 percent of their discretionary income and the government will pay off their remaining federal loans after 25 years of payments.
In 2010, Congress, at the urging of President Obama, changed the program so that borrowers would pay less each month (10 percent of discretionary income) and obtain loan forgiveness sooner (after 20 years of payments). Those changes were originally slated to take effect in 2014, but the Obama administration is using its executive authority to accelerate that timetable, and the new terms could be available to borrowers as soon as this year.
Mr. Obama's re-election campaign has touted the program in advertisements and speeches, framing it as an important component of the president's policies to ease the burden of student debt on young graduates and to make college more affordable to middle-class families. Last month the campaign started a Web site where voters can enter their income and federal student-loan debt into a calculator to see how much lower their monthly payments would be under the new income-based repayment plan.
But looking only at those lowered monthly payments provides little insight into how the changes in the income-based program will affect borrowers over the entire course of repayment, according to Jason Delisle and Alex Holt, the authors of the New America Foundation report. Mr. Delisle and Mr. Holt calculated the impact of the changes over the entire course of repayment, running hundreds of scenarios for different borrower profiles.
They found that while the changes in the income-based program will affect all borrowers, those with higher incomes and larger debts stand to benefit the most.
"If left unchanged," the report says, "the program is set to provide huge financial windfalls to people who, far from being needy, are among the most financially well-off graduates in today's job market."
Helping People 'Most Able to Pay' Low-income borrowers—those earning less than $25,000 a year—will see their monthly payments shrink by $5 to $20, the report says. However, high-income borrowers with high debt loads from, say, graduate or professional school will see hundreds of thousands of dollars of their loan debt forgiven after making payments for 20 years.
For instance, according to the analysis, a law-school graduate who has nearly $122,000 in outstanding federal loans and a $65,000 starting salary that grows to about $200,000 in 20 years will end up having about $23,000 of his or her debt forgiven under the current program. Under the new program, though, the borrower will end up having to pay roughly half as much, and the government will forgive more than $160,000 of the outstanding debt.
"We don't think this program is going to do what it was intended to do," Mr. Holt said. "This is a back-loaded benefit, and it's helping people who are most able to pay. The question we need to ask is whether this is how we want the government appropriating money."
For example, Mr. Holt said, the maximum amount of Pell Grant money that the neediest undergraduate can receive is $23,000 over four years. But students who take out large loans for graduate school (which, unlike federal undergraduate loans, are limited only by the cost of attendance) and then get high-paying jobs would see hundreds of thousands of dollars of their loan debt forgiven.
With those changes, graduate and professional schools will have little incentive to keep costs low because their students will be able to take on large loan debts without ultimately incurring the cost.
The New American Foundation study found that under the new income-based repayment rules, high-income borrowers will not incur any incremental cost in borrowing an additional dollar after they reach $60,000 in loans even if they have a six-figure income over most of their repayment term.
"You've essentially created," Mr. Delisle said, "what is basically a risk-free proposition" for students wanting to take out huge loans to attend expensive graduate programs.
The report urges policy makers to adopt several recommendations, such as limiting the scope of some of the new, more generous income-based repayment provisions and tightening the eligibility for loan forgiveness for high-income borrowers.
If you look you'll see that it was 2005 when Bush changed the bankruptcy law for student loans...now remember, corporate bankruptcy allows all kinds of bankruptcy benefit to businesses including shedding wages and benefits of workers!
Advocates Push Student Loan Forgiveness in Bankruptcy
September 11, 2012, By Howard Law, PC.
Prior to 2005, it was possible to discharge private student loan debts in a Chapter 7 bankruptcy.
Unfortunately, as Los Angeles Bankruptcy Attorney Vincent Howard of HOWARD LAW has previously reported, it isn't possible anymore, except in rare circumstances.
However, advocates are now pushing harder than ever for the legislature to change this.
A spokesman for the U.S. Public Interest Research Group, was quoted as saying that students with mounds of debt are essentially put in "a special circle of bankruptcy hell," typically reserved for deadbeat dads and people who don't pay their taxes. What he means by this is that those are a few of the other select debts that can't be discharged in a bankruptcy: child support payments and overdue taxes.
It's also true that even if private student loans were dischargeable under a Chapter 7, it's not as if you would have hoards of people seeking it out. That's because bankruptcy is not something people take lightly. It's a fresh start, yes, but it's not one that anyone enters blindly. It can temporarily impact your credit and your ability to obtain loans.
That said, the 2005 law was passed prior to the burst of the housing bubble and subsequent economic crisis. So what we have now are people who are burdened with student loan debt, are underwater on mortgage payments and can't find a job. If they are also battling an illness, they may literally be drowning in debt.
During the 2007-2008 school year, about half of all four-year students at for-profit schools held private loans for tuition. At the beginning of this year, national student loan debt reached over $1 trillion. That's more than credit cards. That's more than car loans. In fact, that's more than any other type of consumer debt.
No one ever enters school thinking they are going to be the one unable to find a job when they graduate. But it's happening more frequently than ever now - even to good students who work hard and do all the right things.
The 2005 change in the law was part of the Bankruptcy Abuse Prevention and Consumer Protection Act. Legislators who passed the law have said that even if they did again allow private student loan debt to be discharged, it wouldn't tackle the issue of rising tuition and it would only account for about 15 percent of the overall student loan debt (the majority of which is federal). This is true, but here's the thing when comparing federal student loans to private loans:
- Federal loans have income-based repayment options;
- Federal student loans have far lower interest rates than private loans;
- Federal and state loans allow a portion of loan forgiveness if the individual enters certain public service fields;
- Federal loans allow forbearance and deferment periods not typically available for private loans.
Los Angeles Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
Here is another solution that involves the Federal Reserve doing for students what it is doing for banks and their toxic mortgage loans......we would want banks to pay for their part in creating these bad/fraudulent loans as we want them to pay for creating the fraudulent mortgage loans.
Occupy Wall Street TruthOut.org / By Ellen Brown 41 COMMENTS Toxic Student Debt Might Blow Up Our Economy --
Why the Fed Must Bail Out the Millions of Young People Crushed by Student Loans To prevent another disaster like the one caused by the toxic debts on the books of Wall Street banks, we need to defuse the student debt bomb before it blows. But how? October 21, 2011 | Among the many ideas posed by different groups of protesters on Wall Street and around the nation is student debt forgiveness—a debt “jubilee. Occupy Philly has a "Student Loan Jubilee Working Group," and other groups are studying the issue. Commentators say debt forgiveness is impossible. Who would foot the bill? But there is one deep pocket that could pull it off - the Federal Reserve. In its first quantitative easing program (QE1), the Fed removed $1.3 trillion in toxic assets from the books of Wall Street banks. For QE4, it could remove $1 trillion in toxic debt from the backs of millions of students.
The economy would only be the better for it, as was shown by the GI Bill, which provided virtually free higher education for returning veterans, along with low-interest loans for housing and business. The GI Bill had a sevenfold return. It was one of the best investments Congress ever made.
There are arguments against a complete student debt write-off, including that it would reward private universities that are already charging too much and it would unfairly exclude other forms of debt from relief. But the point here is that it could be done and it (or some similar form of consumer "jubilee") would represent a significant stimulus to the economy.
Toxic Student Debt: The Next "Black Swan"?
The Occupy Wall Street movement is heavily populated with students. Many without jobs, they are groaning under the impossible load of student debts that have been excluded from the usual consumer protections. A whole generation of young people has been seduced into debt peonage by the promise of better jobs if they invest in higher education, only to find that the jobs are not there when they graduate. If they default on their loans, lenders can now jack up interest rates and fees, garnish wages and destroy credit ratings; and the debts can no longer be discharged in bankruptcy.
Total US student debt has risen to $1 trillion - more than US credit card debt. Defaults are rising as well. According to Department of Education data, 8.8 percent of recipients of federal student loans defaulted in fiscal year 2010, up from 7 percent the previous year. With an anemic recovery from a severe recession and a difficult job market, the situation is expected to get worse. The threat of massive student loan defaults requiring another taxpayer bailout has been called a systemic risk as serious as the bank failures that brought the US economy to the brink of collapse in 2008. To prevent another disaster like the one caused by the toxic debts on the books of Wall Street banks, we need to defuse the student debt bomb before it blows. But how?
The Federal Reserve could do it in the same way it defused the credit crisis of 2008: by aiming its fire hose of very low interest credit in the direction of the struggling student population. Since September 2008, the Fed has made trillions of dollars available to financial institutions at a fraction of 1 percent interest; and in audits since then, we've seen that the Fed is capable of coming up with any amount of money required or desired. To the Fed, it is all just accounting entries, available with the stroke of a computer key.
The Fed is not allowed to lend to individuals directly, but it can buy Treasury securities; and with the Student Aid and Fiscal Responsibility Act (SAFRA) of March 2010, the Treasury is now formally in the business of student lending. It can also buy asset-backed securities, including securitized student debt; and there is talk of another round of quantitative easing aimed at just that sort of asset.