The federal government had expected $114 billion income on student loans. But it could lose $197 billion, watchdog finds

  1. >The U.S. Department of Education is expected to lose close to $200 billion from federal student loans made over the last 25 years, due in part to pandemic-era relief pausing the bills for borrowers.

  2. And lets not forget how the government has made it almost impossible to file bankruptcy on student loans. Do you think the politicians kids have to take out loans? These loans are keeping low income and middle class students in their place. I truly believe college is a money making scam. And universities are definitely the winners. NYU and Columbia are buying up Manhattan. It's some of the most expensive real estate in the world. Lucky them, making all that money off the backs of students taking out predatory loans.

  3. Student loans are the worst. I don't understand how any lender would consider it okay to lend to a homeless, jobless kid, with nothing to secure the loan on the premise that the kid might be able to find a job in the future and might be able to pay off the loan. On top of it, we're talking about kids with no credit, no experience in life, and no previous vocational experience. You're just as well giving loans to straight up homeless people with the same expectations. I mean...who gives an unsecured loan to someone without a job? A loan shark?

  4. Man, this 100%. I recently started my own counseling business after being a sole proprietor for 3 years. At no point did I think, "Man I should go back to school for a MBA and drop $60,000 on that." Between my existing accountant, a couple colleagues and Google I figured out everything I needed to run it. There are probably some businesses where that wouldn't work but more and more I'm seeing college as it exists now as being a scam.

  5. Don't forget that many state run universities started marketing going to college more about the "college experience" and FOMO then actually the education. Which is why we have public universities spending millions of dollars on building water parks and other attractions for their students instead spending it to expanding class sizes of the harder to get into and more desirable degree programs that provide actual careers when you get out of college. University of Missouri has an indoor beach with a lazy river and replica of the playboy mansion grotto.

  6. Having a college degree now is like having a high school diploma 40 years ago. The idea that having a college degree will land you in good, high-paying jobs is over. Now it's the bare minimum to have a job at all.

  7. 3a) Is a little more nuanced. State legislatures, especially R lead ones, stripped public ed of A LOT of state and federal subsides, especially around 2008. Between economic panic and ongoing, "dur liberals are ruining your kids," they look for every opportunity to gut universities which lead schools to look for other income streams as student attendance skyrocketed and thus overhead increased. Banks have made a huge amount of money from bundling and swapping student loan debt as a security because it is unable to be declared through bankruptcy.

  8. This is so well said. And it's 100% the problem. I dont even think it's that hard to solve. Just put a limit on the amount you'll loan per student for a undergrad and refuse to send a dime to a school who also takes above a certain amount in private loan money.

  9. This isn't really correct bc you are missing something important. States have been dramatically cutting appropriations for higher education for the last 40 years. Universities charge more and more and yet have less and less. The only winners have been state treasuries.

  10. They really did prey on the lower middle class....we went to college being told we could move up in the world and do better than our blue collar parents. Then we were told we could not get grants because our blue collar parents had jobs, modest houses, 401ks. But our parents still did not have enough money to help us so we took out loans being told we would totally get all that money back with nice white collar jobs. Then we graduate, the world goes to hell, we get low paying jobs and struggle to pay back these loans, and we are told that we should have just not gone to college and gotten a trade instead. Awesome.

  11. Yup, exactly my experience too. "Oh good, accounting is such a stable job field to get into, you'll always find someone needing an accountant or bookkeeper!"

  12. Heaven forbid you throw a family tragedy into that mix and your family has to declare bankruptcy and you don't qualify for certain federal aid your family's lawyer assured you wouldn't be affected.... so now you have mountains of private loans because "our kind of people go to college" only for a couple years later to realize how silly that all is. After your teenaged kid took out the debt.

  13. This is the lie most universities push. You’re basically taking out a loan to live in a country club for four years. These universities install multiple private gyms, amenities, and multiple dining choices and the students are getting the same education I got 25 years ago. My dorm for two years didn’t even have air conditioning in each room. You would think because of cheaper access to information and computers the fixed cost of these places would go down.

  14. I know it is unpopular on Reddit, but I served in the military exclusively for the GI Bill because of this exact situation.

  15. Literally the only reason I’m only $10,000 in debt instead of $50,000 is my dad dying after signing up the loans in his name. It’s fucked up that I need to look at a horrible personal tragedy from the viewpoint of monetary gain but that’s the only way I could’ve made it through this

  16. This is it. Because my parents had a decent house and made ends meet with a little left over my FAFSA form every year said my expected family contribution was $50k plus. My parents made $100k TOGETHER so they’re expected to have half of their pre tax income for my school? I was forced to take private loans because of my family contribution I only qualified for like $3k a semester in federal loans

  17. Bachelors wages have steadily increased and continue to widen the gap between degree vs diploma. The average earner with a bachelors is making around $70k, diploma holders make around $40k on average.

  18. The way all social support instantly evaporates the second you're not starving and on the verge of homelessness is one of the most insidious parts of the US system.

  19. You forgot the whole "go to college for the sake of going to college". Have a friend with an utterly worthless degree (regardless of the economy) and all she does is complain that there are no jobs. Yeah, with your oh so marketable degree in art history...I am shocked.

  20. Not even that it goes to hell. I graduated in 2014 and my first job was paying 32k, in NYC. How the fuck was I even supposed to do anything on that salary?

  21. Me all day long. I’m 36 with 14 years in my field and a master’s degree. Now I’m in 6-figure debt for a graduate degree that has earned me about $3k extra a year in my current position. Which would have been nice if my rent wasn’t also increased 30% this year on top of all the other inflation. Now I live paycheck to paycheck like I did when I was 21 without any degrees at all, working at a car dealership for just above min wage. My money went further then than it does now. Fucking insane.

  22. Did construction for 15 years, decided to find a trade and switch careers. Started pipe fitting for fire suppression and got hurt, lost my job COVID hit had to sell my house from debt caused with COVID and now I'm just like wtf what was the point if it can all just vanish when one bump in the road comes along

  23. It blows my mind that people will with complete sincerity propose solutions to problems that functionally boil down to "time travel."

  24. They promised well paying jobs to prospective students without trying to steer anyone to any particular career. As a consequence, flooded certain sectors of the labor market while leaving others completely dry. This is where the jokes about English degree holders working at Starbucks comes from. The market for English degree holders wasn’t large enough to accommodate them.

  25. That's weird. All my friends that took out loans and went to college are doing well. Every single one of my wife's circle immigrated to U.S., took a ton of student loans and are now lab techs, pharmacists, doctors, etc. making enough money to buy houses and pay their loans.

  26. Exactly. The entire generation/s? Millennials and maybe zoomers were not only sold the lie, but terrorized with it. Bought in and either graduated years ago to shit pay struggling to get out from under it, graduated recently and will do anything, or best ass blast didn’t get to graduate / stalled out while the world burned.

  27. Same boat, though I have a great salary now after 8 years of terrible job hopping in a mean industry, we were in the same situation. Family too rich to get grants and financial aid, and too poor to quickly pay back the loans. I'll have mine for at least another 20 years now.

  28. I always struggled to understand stand how at 18 I couldn’t get a credit card with a $500 line of credit but I could get a $50,000 loan for college with no job history or any type of collateral to provide.

  29. I think at that point you are the collateral. You're borrowing against the expectation that your experience gained will generate revenue to repay the loan down the line.

  30. The former can be discharged via bankruptcy. To make it even more risky for the bank, most people don't typically take out large loans for a car or house until they are older. So you could plausibly max out the cards, declare bankruptcy, wait for it to pass off your credit, and not have a noticeable impact on your life (other than 7 years of not having access to credit).

  31. This is why young ppl need to be told the full story. Don't just "go to college". Instead, make an investment in yourself by going to college if your return on that large investment makes sense for your career goals. Also, don't choose the stupidly overpriced options like private colleges. Go to community school and state universities for the remaining necessary credits.

  32. i got a degree in engineering, it cost me not too much because i did community college first. i wouldnt make near what i do now without it.

  33. What's really wild is that the loan value may have tripled, but I'd be willing to bet that more money is also coming out of pocket for the family/student on top of that. Now it is so normalized for parents to save and spend so much on college expenses and the average family *still* has a hard time making it work.

  34. Where are you getting that the median wage has only increased by 8.8% since 1979? Some quick googling shows me that the median household income in 1979 was $16,530 and in 2019 it was $68,703. That means that the median household wage has gone up faster than the average loan balance at graduation.

  35. Why on earth should the US try to profit from its citizens investing in their education?

  36. My American loans were 5.5% from the government. Sounds like it costs you as much to borrow. American universities are really overpriced though.

  37. Yeah, it's disgusting that they were even trying to make a profit off of student loans. At the very worst the goal should be to break even on them and honestly zero interest loans should be where it's set at.

  38. Do you know why nations without huge amounts of natural resources like oil or gold invest in their education? The profit from government backed student loans at no or low interest, or for that matter education entirely paid for by the state, comes from the increased economic productivity that having an educated and enriched citizenry provides.

  39. Student loans are supposed to be the federal government making an investment in the future of the country, not a for-profit revenue opportunity.

  40. They have often said that college graduates earn an average of $1 million more than non college grads, over the course of their careers. But one has to wonder about the purchasing power those college graduates actually have. Does earning more money even matter if the income will have to be used for loan repayments, loan repayments that can't even be discharged via bankruptcy and take over 20 years (on average) to repay? Young people entering college now should basically expect to be saddled with debt into their 40s. That's no way for a young person to get a start in life.

  41. Unpopular opinion here but yes, college is still a good investment if you major in something desirable. I had $35k in student loans when I graduated, which I paid off, and am much better off now than if I hadn't gone to college. I think the issue of student loans is distorted by the fact that the people who are the most vocal about it are the ones who had the most negative outcomes.

  42. Also those stats are even more inaccurate when you control for race. Most minorities HAVE to get a college degree to make at least as much as a white high school graduate.

  43. A college graduate on average only makes $3k more than high school graduate who has some skill. You can very easily make the financial argument that college does not make sense for a lot of people

  44. Unless the student is spending $1 million to pay back their loans then yes they’re absolutely still coming out on top. Even if you graduated with $100,000 in loans and took 20 years to pay it back with 6% interest you’d still only be paying back $172,000. You’d be up $828,000 over your life time. Education is an investment that pays out significant gains in the long run.

  45. Basically 100% of a college graduate's pay (barring rich parents) goes to the loans, rent, and monthly living expenses, leaving no room for savings. This is the definition of paycheck-to-paycheck.

  46. The problem is the rapid increase in tuition & fees by universities. While everyone rails against big pharma & big oil, why is big education getting a pass for cost increases the have risen faster than drugs or energy over the last two decades?

  47. Until around 1998 (?) people could have their student loans discharged in bankruptcy after seven years (or something like that).

  48. On the same note I had to buy this flimsy, Spanish book each semester because my history major, for some reason, required I learn Spanish. It probably cost $2 to make, but they sell it for $100. You are forced to buy it because it has a scannable code that allows you access to the online homework.

  49. Is there any word of Biden or the Dems potentially extending the Loan Repayment plan a few more months? Could really use that bit if good news.

  50. Last I heard they told lenders not to contact borrowers, which seems to mean extension, as the lenders have to provide X amount of notice to borrowers before repayments start.

  51. Nothing official, but it's highly likely to be extended. The federal government has been telling loan servicers to NOT contact borrowers about payments being scheduled to resume August 31.

  52. I cannot for the life of me see the government requiring repayment the month before the November elections. That would be a terrible thing for people to be thinking about as they go to vote.

  53. Biden is either extend deferment or cancel some portion, id bet 10K, until or before the end of his term. He should do it before the midterms to boost dems and say he cant do more without legislation from congress.

  54. It is most likely getting extended. None of the loan servicers have been alerting people to payments resuming, which they’re supposed to, and that’s probably at the federal governments instruction as it had been every time we get close to the deadline.

  55. They’ll extend forever so that they can keep giving surprises during elections but corp dems have no interest in actually released us from the servitude of student debt

  56. Federal student loans shouldn’t be a money making scheme. I don’t mind repaying the amount I took out for school but the interest is what makes it unbearable. If you can’t pay an amount per month to out pace the interest a 30K loan can turn into 50K real easy. It’s a fucked system for the federal government, at least when you take out a private loan you expect the interest because a private business is wanting to make money.

  57. !00% they would. I was an academic advisor for many years. I was once in a meeting with the college dean who justified raising tuition and fees because the majority of students would get more aid to cover it.

  58. I suspect the college industry would collapse. It's usually not horribly difficult to find schools that are more affordable; people just don't.

  59. At the very minimum they should cap the amount of interest collected. Even if people get private loans with higher interest rates, the amount total should never be more than 1.5x what you paid. Some people end up paying double or triple or more what it actually cost. This just takes more money out of the economy and their kids education and their retirement. It leads to a lower quality of life and a more scarce market where everyone is paying nothing but housing, healthcare and banks/debt.

  60. More importantly, why the fuck does the government think it has to make money off bettering its citizens. Why was that even a discussion? It’s a fucking public works project essentially, why in the hell did they have to profit from it. And for what? Fucking $114 billion, that’s it. That’s barely a drop in the bucket for most agencies over than long of a time period. I hate this timeline. We’ve let greedy assholes and morons lead us, while the actual folks who can make the world better get no attention.

  61. "Income" ??????? WTF. "Screw the ROI of tax revenue from educated people getting better jobs, we want that money off the top!"

  62. Nope, don't care. The government should just pull itself up by its bootstraps and try harder. Just have some gumption and walk into the student loan store and hand the manager their resume. The government could also eat less avocado toast to save money.

  63. The country is spending around 54 cents of every dollar in taxes on military spending, excluding veterans costs. I guess writing articles on that would piss off the wrong people though.

  64. Perhaps all those rich folks who got billions during the pandemic would be willing to give some of that back to offset the loss.

  65. Love this comment but I always interpreted that Pink Floyd line as pure cynicism on the part of the clueless record company exec who’s only in it for the money. Oh and by the way, which one’s Pink?

  66. Why are colleges charging so much for illustration degrees? Basic math says that is not going to end well financially. We need a free public education option.

  67. If you're like me, you have a degree that you regret paying for because that money could have been spent on buying a house.

  68. My degree idk it’s sorta garbage because sure you get the salary they say you’d get but now it costs so fuckin much just to stay alive that the income that was supposed to pay off the debt has been completely offset by rent, food, and utilities. Not to mention the vast majorities of people with degrees get pay that’s very similar to what I see advertised on the sign at Taco Bell. Literally the only option we have is to forgive the student loans and make all public colleges free. What we need to do is ask the countries with free or low cost college education for advice and model a system after theirs. But the republicans would rather have the whole country burn to the ground than ask somebody for help soOoOoOo honestly we’re totally fucked IMO

  69. This was caused by the student loan interest payment suspension and Obama's income based repayment plans, both of which reduced expected income from student loan payments.

  70. The money “lost” means nothing. The money expected to be made means nothing. The expected income isn’t the reason for the loans. It’s control.

  71. I think this is a really big simplification. The government is the one who printed 2 trillion of monopoly money that mostly went to ppp loans with no oversight, so it's their fault the loans are now worth less due to inflation.

  72. To fund the next round of students. The number of students who utilized this program increased every year since it was enacted back in 65.

  73. So what? That is pittance compared to the money blown during covid and is just a tiny sliver of income or expenses for the federal government. Just get it off the books and give real relief.

  74. There was no serious vetting of borrowers under the FFEL program. The financial institution providing the loans had no motivation to do so because the federal government was insuring their losses provided they followed the minimum standards set by the US Department of Education. 2 year default rates peaked at

  75. Oh is it because when you saddle people with infinite debt and give them no way out, they don’t pay? Who could have ever guessed.

  76. Imagine the boon to the economy if we stopped pretending churches were apolitical and started taxing them, after recouping mismanaged covid funding and back taxes from corps and the wealthy of course.

  77. Student loans should not generate any monetary income whatsoever. Students are our future and should be seen as an investment where the returns come in the form of a better educated society.

  78. So fucking what, they piss that away is military spending (remember when they lost 4 trillion, and then the next day 911 happened so everyone forgot? Yeha 4 trillion. A 3 and change hundred bill should be nothing

  79. “the payment pause and interest waiver, have increased the cost of the program, swinging it from a profit to a loss”

  80. I think they were already losing money with how much it cost to contract out the servicing of the loans.

  81. Didn’t expect CNBC to ride that red rocket. They lied to us and exploited us to get degrees that mean nothing.

  82. Why does the federal government need to profit off of predatory lending? If 114 billion unpaid is equal to about 200 billion in losses (including interest), that's quite the grift! Maybe even usury.

  83. I shit you not, I paid $500 for union trade school after 4 years of school and apprenticeship I could make $100k each year. I don't cause I don't have kids so no need to chase overtime. But I read these comments about how much everyone is paying for their major of philosophy,while working their barista job. And it's just 😔

  84. I have nominally an engineering degree and I spend about 10-15% or my time doing rather crude philosophy - the "how do you know that?" kind .

  85. i made the decision to only take classes that i could afford to pay out of pocket. went to a super cheap school. got a great education, didnt graduate... but i never took out a loan. im so fucking glad i made that choice

  86. I'll pay my loans.. I knew what I was doing taking them out. I was a poor fucking kid with no chance of college without them. I got two bachelor's degrees, graduate education, taught classes as a professor, became a PE... All because I had that option. I get others aren't as fortunate... And I respect that if they need the relief. I'll pay mine though... It's worth every penny. Not for me, but for the kid I brought into this world who has everything this far I can possibly give him.

  87. It should have been free in the first place , I paid my ex wife’s and I had the GI bill. I don’t think anyone should have to pay for education. We all should pay.

  88. They not getting a penny more out of me and it seems like a lot of others are done paying. We can’t keep up and why should we keep paying into a corrupt system? So we can go broke?

  89. I feel like I got lucky. I know some things I can do and unless I am not understanding the house market, I might be able to afford my own place soon. I hope it gets better for everyone. We need it.

  90. College should be free. If they truly believed we'd have good jobs at the end of it and through our life they'd make it back tenfold in employment taxes.

  91. It's a fraction of what we pay for pointless wars and corporate welfare. And maybe, just maybe, keeping an entire generation in crippling debt is bad for the government and the economy in the long run.

  92. Went to college got degrees. Made shit money and no bennys. Joined electricians union. Graduated a 5 year apprenticeship. Now travel and make 3 grand a week after taxes. Ask me anything.

  93. Getting so many people out from under crushing debt will free up an enormous amount of spending power instantly. The stimulus to the economy would far outstrip the minor amount owed to the treasury.

  94. Fuck those parasites, never ending usury loans for most often a useless shit education. Employers only give a shit about maintaining caste and its valuation. That why HR is all about that ludicrous purple unicorn bullshit

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