Sen. Al Franken: Student loan debt is damaging America’s economic growth

[cal04]

http://www.marketwatch.com/story/sen-al-franken-student-loan-debt-is-damaging-americas-economic-growth-2015-05-28

(snip)
Things have changed a lot since my wife Franni and I went to college in the early 1970s. A full Pell Grant paid for almost 80% of a public college education. Today, it pays for less than 35%.

(snip)
Part of the reason that this debt is long term is because borrowers are paying high interest rates. Many college graduates are locked into loans with interest rates as high as 10%, which makes it all the more difficult to pay off. When interest rates are low, homeowners, businesses and even local governments regularly refinance their debts. However, the federal government – despite being the biggest student lender by far – offers no refinancing option to student borrowers. Once you graduate with high interest rates, you’re stuck with that high interest rate forever.

So I’m doing something to fix that problem. Earlier this year I joined Sen. Elizabeth Warren from Massachusetts in introducing the Bank on Student Emergency Loan Refinancing Act. Our legislation will allow borrowers to take advantage of lower interest rates and refinance their student loans. This will help millions of Americans, like Joelle, cut down their debt and keep more of their hard-earned paychecks.

I also wrote two bipartisan bills with Republican Sen. Chuck Grassley of Iowa that would help students and families better understand college costs before taking on debt. Our Net Price Calculator Improvement Act makes online cost-calculation tools more user-friendly in order to give students and their families a better estimate of college expenses before they decide where to apply. Sen. Grassley and I have another bill that will require schools to use a universal financial aid letter. Right now, these letters are confusing – they often don’t clearly explain the difference between a grant and a loan, which means students and families may take on debt that they don’t know they have to pay back. Our bill would make sure that students and their families get uniform information so they can make apples-to-apples comparisons between what the different schools are offering.

[FSogol]

1. Thank you for posting a thread that has nothing to do with Sanders or HRC. K&R.

[truedelphi]

2. The Hon John Garamendi, D, here in California, is issuing a call to arms on

The same subject over in the House.

The situation of our punishing people for getting an education is ridiculous.

[global1]

3. A Young Couple That Just Got Married Last April Want To Start A Family & Buy A House....

They both have good paying jobs but are buried in student loan debt. They were told they couldn't afford to buy a house because of the student loan debt. They estimate that their loans will be paid off by the time they reach 59 y/o.

They are beaten before they even get started. If they didn't have the loan debt they would be contributing to the economy by buying a house. Furnishing it. Keeping it up. Paying property taxes. etc, etc, etc.

Unfortunately they will only be padding the pockets of whomever holds their loans.

I think the smartest thing that can happen is to give loan forgiveness - absolve these student loan debts. The money they would have had to pay these loans off would be pumped into the economy instead. Are any in Congress supporting such an idea?

[WillyT]

4. + 1,000,000,000 What You Said !!!

[Thespian2]

5. K & R +++++++++++

What young people today pay for one year at a quality university is more than I paid for under-graduate and graduate schools...after finishing grad school, I paid off a small student loan in less than a year...

[byronius]

17. I once read that not building a single nuclear sub would pay for ten years of free education as well

as housing/food/clothing for every homeless citizen. Michael Moore's stuff about the size of our military expenditure and how it destroys the nation it protects is so apt.

But think of the poor bankers!

[Ilsa]

20. I also think a jubilee is in order.

At a minimum, partial debt forgiveness. Then lower, renegotiated rates.

[cstanleytech]

22. Sounds good but would it really help the economy as a whole? Because someones going to lose money

if they absolve the debt totally and be left holding a bag full of shit.
So wouldnt just lowering the interest to zero help also as well as no penalty for paying the debt off early? That way no ones left holding a bag of shit in the end really and the debt is a hell of alot easier to pay off then for most of the people.

[global1]

25. My Understanding Is That There Are Private Student Loans And Federal Government Student Loans....

Your comment on lowering the interest to zero and no penalty for paying off the debt early would work for the private student loans but I believe the federal government holds the bulk of the student loans and that's the ones that I am saying they should absolve the debt totally.

The government can afford unbudgeted wars. The government can bail out banks that are too big to fail. The government should be able to absorb student loan debt that cripples the very future of the government and of the People.

We hear presidential candidates talking about free college education - and how important that is for the future. That would be the next step after the absolving of the current student loans.

Right now - what is the incentive for a person to go to college if they know that they will be saddled with student loan debt during the remainder of their life? Couple that with the lack of jobs; the squeezing of wages on those jobs remaining - would you make a decision to go to college, incur a great debt that you will be paying off until you die - in order to eke out a struggling existence?

This is a big problem folks.

We that came before (and there are references in this thread of us) that were able to afford our college tuition by working summer jobs and part time as we went to school - are not saddled by debt. We were able to get married. Buy a house. Furnish it. Take a nice vacation every year. Raise a family. That was the way it was then.

Now the tables have turned and education is big business. Look at the tuition costs now. Yet we still urge our kids to get a good education. And I agree - a good education is important. But one has to seriously figure in the long term effects of student loans when one graduates. Run the ROI and determine if it is still worth it.

Every day that ROI gets smaller and smaller and extended longer and longer - to the point that - does it really pay to go to college anymore?

There is some unwarranted passion in what I'm saying here. I'm really pissed by the fact that our kids are beaten before they start.
But I also think there is some truth in what I say here as well.

Again I'll ask - is there any movement by anyone in Congress that is pushing to absolve student loan debt - so that the money that was channeled into the government coffers as interest on these loans can be pumped back into the economy and create a decent future for our children?

[cstanleytech]

26. But the government cannot afford wars it doesnt budget for not really and eventually

someone is going to be given a pretty nasty bag full of shit that they have to pay for them.

[global1]

28. That Someone Is Us The Taxpayer - So Now What Would You Rather Pay For.....

a war or forgiveness of student loan debt?

[cstanleytech]

29. The students of course, after all paying that off now would have bigger positive impact.

Of course we are still going to have to pay for that other nasty bag of shit eventually.

[tblue37]

33. Elizabeth Warren has said--furiously--that it is unconscionable for the government

to make a *profit* on student loans, which at present is what is happening.

[Myrina]

6. And not just recent graduates ...

.... I've been out of college for 15 years. Deferred my loans the first couple years because I was a single mom, just trying to keep food on the table. Over the past 5 years, I've paid enough in loan payments to completely pay for my original balance ($30k) but because interest accrued at 8% and was then compounded AND capitalized, that $30k I've paid back has made no dent in my 'balance due'.

I presently owe $80k. I pay $520 a month but was told my account accrues $485/mo in interest, so I'm actually only paying $35/mo in principal. It is NEVER going to end.

Even if I make the 20 years' payments to reach forgiveness (by which time I will have paid nearly $150k total), whatever amount is forgiven is considered taxable income.

It is paralyzing people's ability to do ANYTHING long-term and, as a result, removing money from the economy.

[taught_me_patience]

8. that's typical for a long amortization.

Over time, you principal payment will grow and the interest will shrink.

[Myrina]

9. $35/mo towards principal is going to take forever ...

... especially when the interest is capitalized at the end of the year and adds a shitload on.

I'm 50, I don't have a lot of 'time' to get this under control before I retire/go on limited income.

[taught_me_patience]

12. If you're paying the principal, then interest isn't capitalized

That 35/mo is going to slowly grow over time. Please look up a 20 year amortization schedule to see what you're paying in interest vs. principal.

[byronius]

18. That is utterly grotesque. A social crime.

Our conservative anchor is dragging us down.

[taught_me_patience]

7. he should push to allow student loan interest deduction

And a refinance at a variable rate. Currently the consolidation rate is 6.9%fixed. If we could refinance at a variable rate, the interest could be a lot lower. Also, allowing a deduction for mortgage interest but not student loan interest is stupid. At least it would help off-s offset interest costs.

[strategery blunder]

32. There is a deduction for student loan interest, but the cap is absurdly low.

Last year I could deduct $2500 (the cap) of the $2900 in student loan interest I paid.

[kenfrequed]

10. Exactly!

Proud of my Senator.

The fact of the matter is that the banks are basically leeching money from young adults just out of school that are ready for their first major durable and semi durable consumer purchases as they establish themselves. Student loan debt is a huge sink on consumer spending. I'm a goddamned borderline socialist and I am making an argument in favor of capitalism. That is how insane this problem is.

[lonestarnot]

11. It's fucking the globe Al. Now get something done about it. And educating have a better understand

ing is not the fucking answer. Get something real like debt holiday or something.

[LuckyLib]

13. The treatment of the banks and banksters in comparison with investing in our young people

is criminal.

[ileus]

14. I know it eats us for around 500 bucks a month.

[Moostache]

15. If only there were a presidential candidate who had a plan for this situation...

Bernie Sanders is talking about this issue.
If you have kids about to enter college (as I will a year from now), you may want to inform them of the candidates' positions on student loans and student debts...just sayin'...

My daughter got a lot more interested in politics when I told her about how much money she stands to lose if the wrong candidates are elected in 2016.

[forthemiddle]

16. Everyone that wants one can get a student loan

That is a blessing, and a curse. A blessing that even the poorest of the poor are eligible, but a curse is the trade off of higher interest rates.
If lenders were forced to offer prime rates, then they would understandably also make the criteria for getting the loan tougher.
It is almost the same problem as pay day loans. If the interest rate was lower, they would not give out as many loans (high default). So you almost get in a rock and a hard place. People that take out pay day loans are DESPERATE. They have no where else to turn, and will starve, or miss rent payments if they can't cash that check. But they are, statistically, also the highest defaulters, so it isn't a smart investment to loan to them. Thus making those places blessing and curses also.
We love to demonize them (rightfully so) but in reality, without them where else could uncreditworthy people get emergency relief?

I love the idea of making student loans transferable to lower rates after the payee has shown themselves responsible, and I also love the idea of making the terms more understandable to new bowerers. Keep up that good work Warren, and Franken

[Xyzse]

19. I wish I can vote for this guy.

[daredtowork]

21. The calculator won't make much difference

Because...American Dream. Colleges are status signifiers as well as mere vendors of education.

If a student is selected for a college they feel they have won a prize and it's their right to go there. If the financial aid office doesn't give them enough they are being cheated and short-changed of their just desserts.

They are more likely to go to the college they are entitled to go to by merit and selection and hope some miracle will occur (late financial aid change, scholarship next year, changes in State/US policy...) than let a "calculator" decide where they should go.

[midnight]

23. Students have been unfairly targeted for loan programs that are out of

sink with the economy. This discussion has been going on for years. Uniform information is great, but relief from debt that is crushing those trying to compete with the rest of the world should be one of the first steps...

[ShawnRIN]

24. Community College

Community college was a great way to knock out my first two years of college at a very low cost. Not everybody needs to go straight to a University right out of High School. I found the education I received more than prepared me for the 4 year university.

[Cha]

27. Yeah, it's serious.. "Obama plans to make it easier to pay your student loans"

snip//

President Obama signed a presidential memorandum Tuesday directing federal agencies to overhaul the way Americans repay their student loans.

The move is the latest in a series of steps the administration has taken to promote college access and affordability, including expanding a program that caps student loan payments to 10 percent of a person’s income for 20 years. It comes at a time when student debt has surpassed $1.3 trillion and the average graduate is leaving school with nearly $29,000 in education loans.

To highlight the importance of affordability, Obama unveiled his plan Tuesday at Georgia Institute of Technology, a school routinely ranked as one of the best bargains in education.

more..
http://www.washingtonpost.com/news/get-there/wp/2015/03/10/obama-plans-to-make-it-easier-to-pay-your-student-loans/

[FSogol]

30. O'Malley pointed out in his announcement today that

Fifty years ago, the nation's largest employer was (General Motors). An average GM employee could pay for a year's tuition at a state university with two weeks' wages.

Today in America, with dreams of college, a decent paying job, and a secure retirement slipping beyond the reach of so very many, the American Dream seems to be hanging by a thread.

Edit: Corrected my paraphrasing with the actual quote from his announcement.

[Romulox]

31. The real problem is that there are no jobs commensurate with the expense of schooling. nt

[Aquavit]

34. This is especially true

if you don't finish your program.

[davidpdx]

35. He's goddamn fucking right it's a problem

We have people on DU whining and complaining that social issues aren't being talked about enough and pretending the financial issues will just take care of themselves. Bullshit!

There are millions of people marred in student loan debt in the US and we are doing very little about it. Obama has been able to get through some small changes on his own, but it's hardly enough. If we continue to play business as usual (with Congress taking no action) our country is going to have another huge bubble burst. Trillions in debt that will go into default.

Even IF we are able to get a Democrat elected in 2016 and take back the House and Senate we couldn't get shit passed. We will continue to sit and wait until the bubble bursts yet again. Big banks own the White House and Congress and 2016 won't be any different. Barring some miracle we will have a DLC president and a Congress full of worthless bluedogs (one of whom happens to be my worthless bluedog, Congressman Kurt Schrader) because why the fuck would we want to support anyone with progressive ideas. That's a dirty fucking word. Then once the bubble bursts it will once again be bailout time.

Either we have to get serious about taking care of the financial issues or learn to live with the continued fall out.