Student Debt Bubble
Borrowers Taking Out Student Loans for Personal Expenses
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  • bigfire

    This is beyond stupid. Student loan cannot be discharged via personal bankruptcy.

    • Enemy Leopard

      If payments can be deferred while enrolled in classes, and there are always more classes to be taken, to be paid for with even more loans, that sounds like only a long-term problem for the borrowers. Perhaps long enough of a term that it’s beyond their time horizons.

      • bigfire

        Back when I was young and stupid, even I was wise enough to repay back ALL of my student loan ASAP. And this is before I came into my personal financial religion (no, i’m not all the way to Dave Ramsey about debt, but close enough). And this was a 22 year old guy.

        Borrowing non-dischargeable loan is as I state, beyond stupid. It’s like United State Treasury issuing bonds by the trillions, and having Federal Reserve buying it.

      • Jim__L

        It sounds to me like a problem for the lenders…

    • Fat_Man

      My guess is that the sorts of people who engage in this type of scam are not the sort of people who really care much about the future.

  • Joseph Blieu

    What is the problem? Take out all the money you can! you don’t have to pay back what
    you don’t have, they can’t confiscate your food stamps and welfare check. Just
    don’t work anymore or get on disability when the free money runs out. Or change
    your name and become a reverse illegal imigrant, no debt and you will get
    amnesty some day.

  • Fat_Man

    The only politically feasible way to control the student loan problems (and this is only one of them) is to make the schools responsible to the government for defaulted student loans. In theory it would be better simply to get rid of loan programs, but that would produce political problems when the beneficiaries of the loans (the schools) argued that the goivernment was making education unaffordable for the “middle class”. The sense of fairness can be appealed to when making the schools, who are supposed to get the money, accounable for the loans.

    • Jim__L

      If the money doesn’t go to tuition, are the schools even in the loop in terms of extending / denying the loans? It seems that schools could wiggle out of this saying, “We don’t have the right to deny the loan, so we shouldn’t be responsible for it.”

      • Julia Rauscher

        My school does approve the loan and receives the funds first. I didn’t know that schools could be left out of the loop.

  • lhfry

    People believe that eventually student loan borrowers will be bailed out. Indeed, some repayment plans already include a bailout:

    Income-Based Repayment (IBR)
    Income-based repayment (IBR) bases the monthly payments on a percentage of discretionary income, not the amount owed. Discretionary income is defined as the adjusted gross income (AGI) minus 150% of the poverty line for the family size. Currently IBR caps the monthly payments at 15% of discretionary income. If a borrower’s AGI is less than 150% of the poverty line, the monthly payment under income-based repayment is zero. The remaining debt and interest will be forgiven after 25 years in repayment. (A new version of IBR will cut the monthly payments by one third to 10% of discretionary income. It will also accelerate the loan forgiveness to 20 years. These changes are not retroactive and are available only to new borrowers of new loans on or after July 1, 2014.)

  • tdpwells

    At my University, the Stafford loan money goes directly to the financial aid office, and they apply the money toward your registered courses and then distribute the excess to you for books, etc. If I got loan money, but never registered for a class, they money would just sit there, but I can’t withdraw it like from a bank. In fact, if I sign up on FAFSA as a full-time student, then only go part-time, it affects the amount I’m eligible for and the school sends it back for re-evaluation.

    I thought this was the norm at schools – apparently not?

    • Julia Rauscher

      That is true for me as well. Unfortunately I do need the extra additional money to help pay cost of living. I’m not sure how to get aid in this area.

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