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 Post subject: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 4:40 pm 
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buck private
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Has anybody noticed how lightly billion and trillion trip off the tongue now days ... it another miracle from the Messiah.

Who cares, easy come easy go, plus we've got money to burn.


The Quietest Trillion
Congratulations. You're about to own $100 billion a year in student loans.

The furor over President Obama's trillion-dollar restructuring of American health care has left his other trillion-dollar plan starved for attention. That's how much the federal balance sheet will expand over the next decade if Mr. Obama can convince Congress to approve his pending takeover of the student-loan market.

The Obama plan calls for the U.S. Department of Education to move from its current 20% share of the student-loan origination market to 80% on July 1, 2010, when private lenders will be barred from making government-guaranteed loans. The remaining 20% of the market that is now completely private will likely shrink further as lenders try to comply with regulations Congress created last year. Starting next summer, taxpayers will have to put up roughly $100 billion per year to lend to students.
***
For decades, loans carrying a federal guarantee have been the most common way of borrowing for college. After raising money in the private capital markets, lenders made the loans, paying a fee to the government for each one. The government covered most of the cost of defaults while allowing the private lenders to make a regulated return.

The system broke down after Congress in 2007 legislated a return so low that no private lenders could make money holding these assets. To keep the money flowing to student borrowers, the government began buying the loans from private originators last year. But this larger federal role was intended to be temporary, with an expiration date next summer. The news from Washington now is that rather than scaling back federal involvement, the pols want the U.S. Department of Education to be the exclusive banker to America's college students.

It's not a popular idea on campus. Loans directly from the feds have been available for decades, but the government's poor customer service has resulted in most borrowers choosing private lenders. This week three dozen college administrators, representing schools from Notre Dame to Nevada-Reno, signed a letter urging a longer transition period to this "public option." The fear is that the bureaucrats will not be able to pull off a takeover in just eight months. "Any delay in getting funds to schools on behalf of students will result in our needing to find resources at a time when credit is difficult to obtain," warns the letter.

Tough luck for the Irish. ...
(Continued)
http://online.wsj.com/article/SB1000142 ... torialPage


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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 4:47 pm 
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This is just BS. The WSJ expects that no one will pay their student loans back. Just loony right demagogy. :evil:

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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 5:37 pm 
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nero wrote:
This is just BS. The WSJ expects that no one will pay their student loans back. Just loony right demagogy. :evil:



According to the US Dept. of Education:

Quote:
...the FY 2007 national student loan cohort default rate increased to 6.7 percent, up from the FY 2006 rate of 5.2 percent.

The rate announced today is a snapshot in time, representing the cohort of borrowers whose first loan repayments came due between October 1, 2006 and September 30, 2007, and who defaulted before September 30, 2008. Some 3.3 million borrowers entered repayment during this time, and more than 225,300 borrowers went into default. They attended 5,776 participating institutions.

http://www.ed.gov/news/pressreleases/20 ... 42009.html

Those are the government's numbers.

Also, remember that the US unemployment rate at the end of that period (9/2008) was 6.2%. The most recent unemployment figure for Aug. 2009 was 9.7%. http://data.bls.gov/PDQ/servlet/SurveyO ... NS14000000

Therefore, one can expect that 6.2 % default rate to increase significantly.

The upside of this is that there will be an increase in the number of people that will need to be hired to collect all those defaulted student loans. The downside of this is that the government has been phasing out a program it had where commercial collection agencies were used to collect on some of those loans. You will likely see a spike in the number of civil service employees required to collect on thoses loans.

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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 5:41 pm 
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chijohnaok wrote:
nero wrote:
This is just BS. The WSJ expects that no one will pay their student loans back. Just loony right demagogy. :evil:



According to the US Dept. of Education:

Quote:
...the FY 2007 national student loan cohort default rate increased to 6.7 percent, up from the FY 2006 rate of 5.2 percent.

The rate announced today is a snapshot in time, representing the cohort of borrowers whose first loan repayments came due between October 1, 2006 and September 30, 2007, and who defaulted before September 30, 2008. Some 3.3 million borrowers entered repayment during this time, and more than 225,300 borrowers went into default. They attended 5,776 participating institutions.

http://www.ed.gov/news/pressreleases/20 ... 42009.html

Those are the government's numbers.

Also, remember that the US unemployment rate at the end of that period (9/2008) was 6.2%. The most recent unemployment figure for Aug. 2009 was 9.7%. http://data.bls.gov/PDQ/servlet/SurveyO ... NS14000000

Therefore, one can expect that 6.2 % default rate to increase significantly.

The upside of this is that there will be an increase in the number of people that will need to be hired to collect all those defaulted student loans. The downside of this is that the government has been phasing out a program it had where commercial collection agencies were used to collect on some of those loans. You will likely see a spike in the number of civil service employees required to collect on thoses loans.
(My Bold) Another plus is they'll be unionized ... one more blessing from the Messiah.


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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 6:05 pm 
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I forgot to add in that in the event the USGov is unable to hire enough additional employees to collect the loans (unlikely, but possible), the loans will simply not get collected as thoroughly. But then, its just taxpayer money....no big loss....

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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 6:49 pm 
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Student loans are not-bankruptable. Most of the people in default are behind on payments, but they will eventually be forced to repay.

On the list of fishy assets on the government books this does not even make the first 100 pages.


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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 7:05 pm 
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Mangudai wrote:
Student loans are not-bankruptable. Most of the people in default are behind on payments, but they will eventually be forced to repay.

On the list of fishy assets on the government books this does not even make the first 100 pages.


While they are generally not dischargeable through a bankruptcy, that does not make them all collectible.

I spent slightly less than a year after I got out of college (~1989) working for two collection agencies that were working student loan collections under contract with the US Dept of Education. There were ALOT of old loans on the books that were still under active collections. Most of the loans the companies that I was with were collecting on were from the 1970's, some were as "recent" as 1984, but there were some loans that dated back to 1952-53. Some of these oldest loans were taken out by veterans under the GI Bill after the Korean War. Yes, the Dept of Ed. still was trying to collect on $250 35+ year old loans. Loans that were used to pay for a correspondence course on how to build and service this new thing called "television".

Some of these loans were "fishy". After skip tracing down some of these "defaulted borrowers" (not the veterans) we were told by them that the only reason they took their student loan out was because taking some sort of educational course was a requirement in order for their welfare benefits to continue. So they simply enrolled in school, took out the loan to pay for it, and never even bothered to spend a day in class. Was just a "necessity" to keep Uncle Sam sending them their monthly checks.

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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 8:19 pm 
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Quote:
Loans that were used to pay for a correspondence course on how to build and service this new thing called "television".



:lol:

I think my WWII era father did a correspondence course on that new "wonder thing " called fiberglass...

:lol:

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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Mon Sep 14, 2009 8:25 pm 
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Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.
Benjamin: Just how do you mean that, sir?

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 Post subject: Re: You're about to own $100 billion a year in student loans.
PostPosted: Tue Sep 15, 2009 2:55 am 
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nero wrote:
This is just BS. The WSJ expects that no one will pay their student loans back. Just loony right demagogy. :evil:


Not many pay them back. Where you been? :roll:

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