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Will Student Loans create a crisis in education?

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Will Student Loans create a crisis in education?

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This article talks about the crisis of student debt and gives a LOT of information about the underlying effects of it on both students ant the economy. It also writes how if students aren't able to afford the loans given by colleges they may never actually attend college, thus lowering the rate of educated individuals in our job market, and overall reducing our economy.

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EBSCOhost - world's foremost premium research database service

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EBSCOhost (ebscohost.com) serves thousands of libraries and other institutions with premium content in every subject area. Free LISTA: LibraryResearch.com

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The article discusses many of the problems with the student loan market, talking about how it is bad for the economy, as well as the effect it has on our next generation. It even discusses potential solutions, such as with State Governments giving out more regulated loans instead, but it also attempts to debunk some solutions as well.

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EBSCOhost - world's foremost premium research database service

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EBSCOhost (ebscohost.com) serves thousands of libraries and other institutions with premium content in every subject area. Free LISTA: LibraryResearch.com

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Scholarly Research - The Truth about Student Debt

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Scholarly Research - The Truth about Student Debt

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After searching "Student Loans", I found this resource on the Academic Search Complete data base of DVC. It is a very interesting read, trying to diagnose the problem of student debt. It argues against it, saying that it is not a crisis, and provides stats and figures to support the authors conclusion on that reason. I found it interesting to see it from someone else's point of view.

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Section:

FEATURES

IT'S BAD. But that's no reason not to borrow. Here's why.

The facts seem stark: about 45 million americans now owe a stunning $1.6 trillion in student debt. That's roughly one in every four adults, nearly double the number who had higher education loans 15 years ago. Among millennials, the number is one in three, often cited as a reason why so many young adults can't afford to buy a home, get married, have a family or move out of their parents' basements.

Meanwhile, the average amount that undergraduates borrow has shot up 60 percent over the same period, and defaults on loans have jumped as well. More than one-quarter of students can't keep up with their payments 12 years after borrowing, vs. 18 percent just a few years ago, and that number is projected to hit 40 percent by 2023. With default can come heartache: It can ruin people's credit scores, wreck their ability to borrow or rent an apartment and, in some areas, cause their professional licenses to be revoked.

Given all that, it's not exactly shocking that a lot of people are using the word "crisis" to describe student debt these days. Or that college loans and the pain they can cause have become a hot topic in the 2020 presidential campaign. Nearly every candidate is turning up the hyperbole and offering a proposal for debt relief, from the modest (hello, Kamala Harris, Beto O'Rourke) to the sweeping (nice to see you, Bernie Sanders, Elizabeth Warren).

But while there's definitely no denying that some people with student debt are having serious problems, the notion that the entire system is completely broken is just plain wrong, many experts say. Moreover, the prevalence of this total-disaster narrative obscures some key facts about borrowing-like for instance, that $100,000-plus balances are actually rare and that it is the students with the smallest amount of debt who tend to be the ones who struggle the most.

"Calling it a crisis misrepresents the situation," says Sandy Baum, senior fellow for the Center on Education Data and Policy at the Urban Institute. "Not everyone with student debt is having his or her life ruined. The truth is that access to student loans increases educational opportunities for lots of people, and for many it's an investment that pays off well. It's also true that some people have severe problems because of the loans they've taken out." "It's not," she adds, "monolithic." A soon-to-be released survey by the Washington think tank New America shows that misperceptions abound. Respondents overwhelmingly believed that college loans were the largest source of consumer debt in the U.S. (it's actually mortgage debt, by a land-slide) and dramatically overestimated how much students typically borrow and the percentage of people who default on their loans.

"I worry that we're giving students the message that borrowing is bad and that you should never borrow a cent for higher education," says Rachel Fishman, deputy director for research of the education policy program at New America. "Given how much college costs, for most families, that's simply not realistic." Here are six key facts about student debt in the U.S. that often slip beneath the radar but are critical to informing the national discussion about how to reform the system.

PerhaPs the most eye-PoPPing figure commonly quoted about student loans is $1.6 trillion. That's the total amount of outstanding higher education debt in the U.S., and it's been growing exponentially since 2006, when it weighed in at a mere $480 billion.

As a result, student loan balances today are bigger than outstanding credit card debt, bigger than what people owe on auto loans, and second only to mortgages and home equity borrowing-collectively, $9.7 trillion-as the country's largest source of consumer debt.

Yes, $1.6 trillion is a troubling number. But it masks an equally important counter trend that not many people are aware of: In recent years, students collectively have been borrowing less, not more, for college. In fact, new borrowing-and new is the critical word here-has fallen in each of the past seven years.

The numbers tell the tale: According to the College Board, the amount undergraduates borrowed in federal loans dropped last year to $4,510 per student from $5,830 in the 2010-2011 academic year. Loans taken out annually by students and parents for all higher education institutions also fell, from a peak of $127.7 billion in 2010-11 to $105.5 billion last year.

What's behind the drop? Well, for one thing, there are fewer people going to college and grad school these days to take out loans. Attendance tends to climb during a recession when people can't find jobs and fall when the economy recovers and that pattern played out as usual after the 2008 financial crisis, explains the Urban Institute's Baum. In better economic times parents may also be able to pay more toward college costs, decreasing the need for dependent students to borrow. And, over the past few years, a decline in the number of for-profit schools, where borrowing tends to be heaviest, could also be a contributing factor, Baum adds.

Economic recovery has also enabled states and schools to do more to rein in costs and borrowing. According to The Institute for College Access & Success (TICAS), state spending on higher education following the Great Recession increased an average of 23 percent over the four years ending in 2016. In addition, TICAS found that undergraduates at four-year public or private colleges are more likely to get grants from their school these days, and the grants are typically about $1,000 higher.

What is not yet clear from the data: whether the decline in loans is also partly a reaction to the increasingly negative storyline around borrowing. New America's Fishman is seeing that shift in attitude in focus groups. "A few years ago, people were saying things like, 'Borrowing is a means to an end, it's just what I have to do to go to college,'" she says. "Now people are saying, 'I'm going to do everything I can to avoid borrowing at all costs.'" Although the decline in student loans may seem at odds with everything you've heard lately, it actually isn't. It's simply that two different things are being measured-total debt versus new borrowing. What's largely driving the big growth in total student debt is the build-up of interest on older loans, particularly as more borrowers enroll in income-based repayment plans. The income-based plans, which have been expanded several times over the past decade, allow borrowers to stretch payments over 20 or 25 years, instead of the standard 10, to lower their monthly bills. But interest continues to accrue and adds to the amount owed. Today, roughly half of loan dollars being repaid are enrolled in income-driven plans, compared with 27 percent just four years ago.

Also contributing to the build-up of total debt: A surge in big-balance borrowing by graduate students and parents (more on that in a moment). Although the number of people involved is small, they have an outsized impact on outstanding balances. in absolute numbers, PeoPle with six-figure debt really are rare-what Fishman calls "unicorns in borrowing land." Overall, just 6 percent of the balances on student loans are $100,000 or more. But in dollar terms, they're huge, accounting for one-third of total debt, the College Board reports.

It's mostly graduate students who belong to the $100,000 club, and membership is growing fast. Among borrowers with a graduate degree who started paying off loans in 2014, 20 percent owed more than $100,00, up from 8 percent in 2000, says Adam Looney, an economist at the Brookings Institute. And half of borrowers with professional degrees-think doctors, lawyers, dentists-owe $100,000 or more; 20 percent owe $200,000 and up, the College Board reports. That doesn't include their undergraduate debt.

The borrowing spree began around a decade ago with the establishment of the graduate PLUS loan program, which allows students to borrow up to the full cost of attendance, minus other aid, and only a cursory credit check required. The government also raised annual limits for traditional Stafford loans for graduate students to $20,500, up from $18,500 previously, and made it easier to borrow to attend online and for-profit programs.

In a labor market that tends to reward more credentials with higher salaries, students were quick to take advantage of the new ways to finance a graduate degree. And for many, the investment paid off. Borrowers with student loans of $50,000 or more (a proxy for graduate borrowers) earned about twice as much as those with smaller loans in 2014 and had far lower default rates,.

But cracks are starting to show. A growing number of graduate borrowers are going to for-profit schools, which typically don't lead to good jobs-17 percent attended for-profits in 2014, vs. just 1 percent in 1990. An even larger number are opting for income-driven repayment plans to keep initial payments low, though interest keeps building. The upshot: For the first time starting a few years ago, large-balance borrowers collectively owe more than they did when they first graduated, even though they've been making loan payments for a few years.

"A lot more of these big borrowers are struggling," Looney says. "I'm not so concerned about the doctors and lawyers and MBAs, who'll be okay in the end. But the people who are borrowing heavily to attend programs that offer no real labor market value-that is troubling." Another worrisome trend: a recent surge in parent borrowing. Although fewer than a million of the nation's 45 million higher education borrowers are parents, those who do take out loans tend to go big. The typical parent loan last year was $16,452-an increase of 42 percent over a decade-and many borrow every year their son or daughter is in school, and for multiple children. As a result, in dollar terms, parents now account for 23 percent of the outstanding $1.6 trillion in student loans, up from 14 percent five years ago, the Urban Institute reports.

Middle-class and affluent parents are the most likely to borrow, but a sizeable number of lower-income households use PLUS loans too, including 16 percent of families with incomes below $20,000. Default rates are generally low but for some groups, such as families whose child attended a for-profit school-schools like Strayer University, American Intercontinental University or Walden University-the risks are much higher.

Even short of default, these loans can be problematic for parents nearing retirement, a time when income will likely fall and it's important to be debt-free. One-quarter of parent PLUS borrowers are 60 or older, according to the Urban Institute, and nearly half of them have less than $50,000 in savings.

"I'm worried about the parents who really want to give their kids this opportunity and don't see another way," says Baum, who co-authored the report.

IT'S A STATISTIC THAT GETS BANDIED ABOUT ALMOST AS MUCH AS the total debt figure: The average senior graduating from a four-year college today leaves school owing close to $30,000-$29,650, to be precise, according to TICAS. And while that number has basically held steady for the past five years, it's still more than double the amount students borrowed to get a B.A. in 1996..

Here's the thing, though: That "average" is heavily skewed by large balances held by a minority of students-most likely, older, independent students who are allowed to borrow more-and probably doesn't reflect the typical college student's experience. In fact, three-quarters of students at four-year public colleges and two-thirds of students at private schools graduate with less than $30,000 in debt; about half have borrowed less than $20,000 and four in 10 come in under $10,000. Three in 10 undergraduates have no debt at all.

Of course, any amount of college debt can be a drag on a young person just starting out. But other factors may have as big a role, or bigger, in holding millennials back from things like buying a home or starting a family. Like how expensive housing has gotten: In 70 percent of U.S. counties, the average annual salary isn't high enough for residents to afford a median-priced home. Or the high price of childcare: A new Care.com survey found that 70 percent of families pay more than 10 percent of their income on childcare; nearly half pay 15 percent or more.

But since a college degree typically leads to better job opportunities and higher pay, borrowing to get a B.A. is an investment that pays off for many and can help with the cost of housing and childcare. The typical graduate of a four-year college earns about 70 percent more than someone with only a high school diploma, while those with advanced degrees make about 120 percent more. but what haPPens to students who don't make it to the finish line-the ones who take out loans but leave college before earning their degree? These students end up borrowing relatively small amounts but don't get the same payoff as those who get their B.A. And it turns out that the payoff, not the size of the loan, is the critical factor to the outcome.

Consider: About half of all people who default on their loans never earned a college degree, and nearly two-thirds of them owe less than $10,000, according to a recent analysis by Ben Miller, vice president for postsecondary education at the Center for American Progress. Some 35 percent of them owe less than $5,000. Federal Reserve Bank of New York data also show that people with more than $100,000 in student loan debt are about half as likely to default as those with less than $5,000 in student loans.

"While the exact reason these [small-balance] borrowers struggle unknown," Miller wrote, "a likely explanation is that they did not receive a sufficient earning boost to pay off their debt, meaning they have all of the expense and none of the reward of attending college." It's a problem that has been falling underneath the radar for a long time, says Judith Scott-Clayton, associate professor of economand education at Teachers College of Columbia University. "So much coverage is given to students with over $100,000 in debt and the burden that puts on their ability to live and buy a house and raise kids and do all the things that constitute adulthood," she says.

don't want to minimize the depths of their challenge, but when you look at the problem from 30,000 feet up, it's the borrowers with the least debt who are suffering the most, who face the most severe consequences and long-term implications for their finances, and they are the ones who need help the most." That recognition has serious policy implications, says Scott-Clayton, who has testified before the Senate three times as an expert financial aid research and policy. She notes, "Thinking that the urgent problem is the amount students have borrowed leads to a different set of responses than if we think the issue is more about how borrowers navigate repayment." Students who attend for-profit colleges also default on their loans at a much higher-than-average rate: 30 percent of bachelor's degree holders who started at a for-profit college defaulted on their loans within 12 years of starting school vs. 5 percent of B.A.s who began at private nonprofit or public schools, TICAS reports. Othgroups that have a higher-than-average risk of default include students from low-income households, those who are the first in their family to go to college and black students.

IN FACT, IF THERE IS ANY SINGLE GROUP FOR WHOM THE WORD "crisis" most accurately describes their experience with student loans, it is African American students and their families. Black students are far more likely to take out loans (17 percentage points more), borrow larger amounts (twice as much, on average) and default at a higher rate (38 percent default within 12 years of starting school, vs. 12 percent of white college entrants).

Says Scott-Clayton, whose recent research has focused on alarming patterns of student loan default, particularly among African Americans, "What's most shocking is not that these disparities exist but the sheer magnitude of them." Even graduating and getting a degree does not insulate African American borrowers from bad outcomes, as it commonly does for other students. In fact, a black person with a bachelor's degree is more likely to default than a white dropout.

Nor does having that degree provide the same help paying off college loans: Twelve years after starting school, black graduates, on average, owed 114 percent of what they'd originally borrowed-that is, more than their original loan-compared with 47 percent for white students and 79 percent for Latino students. Projecting default rates out 20 years, Scott-Clayton concluded that 70 percent of black student borrowers may ultimately default on their loans.

Looking for answers that explain the wide disparities, not only between black and white students, but between black borrowers and other students of color, Scott-Clayton's research identified some fairly predictable contributing factors. But even after accounting for things like family income, parental education, amounts borrowed, grades, degree attained and post-college employment and salary, she found that an unexplained 11-point disparity in default rates between black and white student borrowers still remained.

In a letter to Senators Elizabeth Warren and Kamala Harris, among others who had solicited input on how best to address racial disparities in student loan debt, Scott-Clayton shared her findings, pointing out the unexplained 11-point gap and noting the results might not "fully capture differences in students' economic circumstances post-college, in their family support and information networks, and/or in the quality of service they receive from their institutions and loan servicers as they naviagte repayment." Another likely contributing factor, she added: "A longstanding, pernicious legacy of bias and discrimination can help explain why the patterns observed for non-Hispanic Blacks are distinct relative to persons of color or low-income students generally."

New America's Fishman agrees. "In America, we think education will solve everything and the sad truth is, it doesn't," she says. "Research shows that higher education actually has very little impact on the racial wealth gap because there are so many other economic factors involved, such as labor market discrimination and institutional racism within our economy."

Hundreds of years of systemic racism won't be fixed any time soon but Scott-Clayton suggests a few practical steps that would be helpful in the meantime. Among them: Simplifying and automating the current income-based repayment program to encourage more financially strapped borrowers to take advantage of them and a more targeted loan forgiveness program than is currently under discussion, for borrowers with up to $6,125 in undergraduate loans. Almost 40 percent of borrowers in this group, and 70 percent of black borrowers, default within 12 years. The cost would be relatively modest, she says-a best bang for the buck approach.

IN FACT, NEARLY ALL OF THE DEMOCRATIC PRESIDENTIAL candidates have come out with some kind of proposal to help reduce student debt and even President Donald Trump favors modifying repayment plans to make them less complicated for borrowers.

No plan has captured the public imagination more, though, than the sweeping proposals from Senators Elizabeth Warren and Bernie Sanders to wipe out existing debt for all college borrowers (Sanders) or a large portion of loans for all but the wealthiest taxpayers (Warren). Debt forgiveness, as Fishman says, is "the sexy new thing, the shiny object." But if you need evidence that erasing student debt in the U.S. would be a much thornier challenge than the candidates own up to, look no further than what's happened with the country's more limited attempt at it: the federal Public Service Loan Forgiveness program. Signed into law by President George W. Bush in 2007, the program promised to forgive student loans

How to Avoid Personal a Student Debt Crisis

NO MATTER WHERE YOUR CHILD IS IN THE COLLEGE PROCESS, YOU CAN TAKE STEPS HELP KEEP BORROWING TO MANAGEABLE FOR BOTH OF YOU-AND POSSIBLY EVEN AVOID LOANS ALTOGETHER. HERE'S WHAT YOU NEED TO KNOW.

WHEN YOU'RE APPLYING

> Check the Scorecard. Uncle Sam's College Scorecard (collegescorecard. ed.gov) is a treasure trove of info that can help you make informed choices about what particular schools will cost, based on your family's income. Other key data: how much debt the typical student has at graduation; the percentage of undergrads who get aid; and the average salary of grads who got aid.

> Calculate Your Net Price. Even schools with the same sticker price can vary widely in cost to you, depending on how generous they typically are with aid-and how much of that assistance comes in the form of grants vs. loans. By federal law, most schools are required to post a net price calculator on their website that will give you a personalized estimate of your costs. The College Scorecard also provides links to each school's calculator.

> Add a Financial Safety. Just as your child's college list should include an academic safety, so should it include two or more schools likely to be truly affordable for your family. At least one should be a public in-state college. For the second: Identify a private school where your child ranks in the top 25% of applicants, which boosts the chance of a generous aid package that could end up being cheaper than a public college.

> Explore Creative Financing. Determined not to borrow? Look into one of the growing number of schools, such as Clarkson and Purdue, that offer loan alternatives called income sharing agreements: The school gives a certain amount of money toward tuition in exchange for a percentage of the student's income for a set number of years after graduation.

ONCE YOU'RE ACCEPTED

> Favor Federal Foans. For stu-dents, government loans are almost always the best deal because the rates are low (4.5 percent, as of July 1st); they're easy to qualify for; part of the interest may be subsidized while in school; and they offer a variety of repayment plans after graduation. Annual limits for dependent students range from $5,500 for freshmen to $7,500 for years three, four and, if needed, five.

> Tap the House. If, after your child has maxed out federal student loans for the year, you still need to borrow, a home equity line of credit may be less expensive than a federal parent PLUS loan. The national average rate recently on HELOCs was around 5.5 % vs.

7% for parent PLUS loans, which also charge a hefty 4.2 % origination fee.

> Stay the Course. One of the top risk factors for defaulting on student loans is not completing a degree. Students should work with an academic advisor from the get-go to make sure they stay on track.

AFTER GRADUATION

> Know the Options. After a six-month grace period, payments will begin for Stafford loans; you'll be defaulted into a standard 10-year payment plan unless you choose an income-based repayment program.

These stretch payments over a 20 or 25-year period with payments limited to 10 to 15 % of your income.

If you still owe money, the balance will be forgiven, but the amount will be treated as taxable income.

> Ask the Boss for Help. Eight percent of U.S. employers offer their workers help with student loan repayment, including Abbott, Aetna, Fidelity, PwC and Staples. Currently the assistance is treated as taxable income, but bipartisan legislation was introduced in Congress earlier this year to make the benefit tax free.

> Catch a Break. Up to $2,500 in student loan interest a year is fully or partially deductible, if you're married and have income below $170,000 ($85,000, if you're single). That's worth up to $600 off your taxes, if you're in the 24% bracket. -D.H. for borrowers with a decade of service in government or nonprofit jobs. But since the first borrowers became eligible for forgiveness 18 months ago, nearly 74,000 have applied and more than 99 percent have been rejected-a spectacular failure rate that has prompted widespread derision, anger and a spate of lawsuits, including one by the American Federation of Teachers accusing Education Secretary Betsy DeVos of gross mismanagement.

Many higher education experts applaud the candidates' desire to help struggling borrowers, but raise serious questions about the cost, effectiveness and fairness of the proposals so far. "For someone like me, who's worked in the area for a long time, it's exciting and heartwarming to know this issue is getting attention," says Scott-Clayton. "But now that we've crossed that major hurdle, the question is whether attention is being directed in the most productive way." Rather than costly broad strokes that offer relief even to borrowers who can comfortably manage their loan payments and that do little or nothing to prevent future student debt problems, many people in the field advocate more targeted initiatives. Devise solutions for what have already been identified as the most egregious problems, such as high default rates at for-profit schools and certificate programs, the overly complicated loan repayment system, and lofty loan limits and scanty credit checks for grad students, parents and others that allow them to borrow beyond their means.

For example, while federal loans for dependent undergraduate students are capped at $31,000, graduate students and parents under the PLUS loan program can borrow as much as it costs to attend. Unlike applying for virtually any other kind of loan, income and assets aren't considered in the approval process. Borrowers only need to show they don't have an adverse credit history, such as delinquent debt or a recent foreclosure or bankruptcy. As Looney wrote in a recent Brookings paper, "The simple, obvious mantra of reformers should be: Don't make loans we know borrowers would suffer to repay." To focus solutions that effectively, however, policymakers need to pay more attention to the facts than the spin and zero in on where the greatest pain points really are. As it stands now, most of the public debate is still focused on how much students are borrowing and how quickly big-balance loans are growing. But the most serious issues, as the statistics reveal to anyone who looks closely enough, have more to do with repayment, not new borrowing, and with small borrowers rather than large ones. Without that recognition, that aha moment, the "crisis" won't be resolved.

In the meantime, the clock is ticking. If the current rate of growth continues, outstanding student debt will exceed $2 trillion as soon as 2022. Let the hand wringing begin.

PHOTO (COLOR): CRISIS? New borrowing, particularly among undergraduates, has fallen in each of the past seven years. Pictured: Hats off and up at Wesleyan University in Middletown, Connecticut.

PHOTO (COLOR): THE PAYOFF "The truth is that access to student loans increases opportunities for lots of people," says education expert Sandy Baum. Pictured left: Tag worn by a student at a University of Southern Maine protest. Above: Graduating ceremony at Stanford University last June.

PHOTO (COLOR): VOICES OF DEBT The truth: Undergrad degrees pay off in jobs. Pictured right: Students complain on Hollywood Boulevard. Top: Looking for work in Riverside, California.

PHOTO (COLOR): TROUBLE Borrowers going to for-profit colleges often struggle the most with debt. Pictured clockwise from left: DeVry College in New York City; Education Secretary Betsy DeVos; and a happy Harvard University graduate.

PHOTO (COLOR): WIPEOUT Senators Warren and Sanders are both proposing some version of loan forgiveness. Below: the ceremonial opening of a recent Democratic party presidential debate in Detroit. Left: A cybersecurity employment event in Long Beach, California.

PHOTO (COLOR): CHALLENGING Erasing student debt would be a bigger task than the candidates are owning up to. Top: Senator Warren speaking to the American Federation of Teachers in Philadelphia.

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Section: FEATURES IT'S BAD. But that's no reason not to borrow. Here's why. The facts seem stark: about 45 million americans now owe a stunning $1.6 trillion in student debt. That's roughly one in every four adults, nearly double the number who had higher education loans 15 years ago.

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Although DeVos tightened restrictions, through a Judge's order 15,000 Students' loans were cancelled.

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Although DeVos tightened restrictions, through a Judge's order 15,000 Students' loans were cancelled.

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After being taken to court for a previous law on restricting student loans, Devos was beaten in a legal case and forced to forgive over 15,000 students' loans. This is a step in the right direction, but like before, it is not enough.

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After Education Secretary Betsy DeVos lost a fight to delay new rules, federal loan debt is being automatically eliminated for about 15,000 students who attended schools that closed. Credit Credit Tom Brenner for The New York Times

The Education Department is wiping $150 million in federal student loans off the books, and has begun the process of informing thousands of borrowers that they no longer owe the government money because the schools they attended shut their doors.

The loan forgiveness, announced this week, applies to about 15,000 borrowers as federal education officials begin to carry out new rules that they fought in court for more than a year before giving up in October.

The department said it began notifying some of the borrowers by email on Friday that their loans would be discharged within the next few months. Any payments that the borrowers made toward a loan will be refunded, it said.

About half the borrowers attended Corinthian Colleges, a large for-profit chain that went bankrupt in 2015 after a deluge of lawsuits accusing it of predatory recruiting practices and false marketing. The rest attended one of the more than 1,000 other schools that shut down between November 2013, the start date for the automatic-discharge rules, and November 2015.

The new rules require the department to automatically forgive the loans of eligible borrowers three years after their school closed, although they can apply before then. The universe of eligible borrowers is growing: Last week, Education Corporation of America, a for-profit chain of vocational schools with about 20,000 active students at more than 70 campuses, closed without notice.

Under the Education Department's closed school forgiveness program, federal student loan borrowers can apply to have their loans wiped away if they attended a school that closed while they were enrolled, or soon after, and they do not transfer their credits elsewhere.

The program is based on the principle that lenders bear responsibility for ensuring that a loan is sound, and that borrowers shouldn't be responsible for loans taken out for an education that turned out to be worthless.

For years, borrowers who thought they qualified had to submit an application for relief. The change authorized in 2016 added the automatic forgiveness provision. This week's loan discharges were the first to be done automatically.

The change was supposed to take effect last year, but Education Secretary Betsy DeVos delayed the automatic discharge, which she criticized for "putting taxpayers on the hook for significant costs."

In September, a federal judge ruled that Ms. DeVos's delay was illegal, calling it "arbitrary and capricious." A month later, he ordered the department to follow the new rules. Liz Hill, a department spokeswoman, said at the time that it would comply.

The Education Department monitors the financial health of schools that receive federal loan funds, and it is supposed to demand financial collateral from those that seem at risk of closing. But the rules of that process are complex, and when schools abruptly collapse, taxpayers are often left with the bill.

A parallel loan forgiveness program, borrower defense, allows students to have their loans eliminated if they can prove that their school defrauded them. The Education Department has eliminated nearly $535 million in debt, most of it held by former Corinthian students, through that program. Its pool of claims is much larger - more than 100,000 are pending - because it applies to borrowers who attended schools that remain open or closed more than 120 days after they left.

A tally of how much total debt has been eliminated through closed-school discharges is not available, an agency spokeswoman said.

Ms. DeVos has said she intends to rewrite the rules for some of the agency's debt-forgiveness programs. The soonest those changes could take effect is July 2020.

At an industry conference last month, she reiterated her criticisms of how the federal government, the primary lender to students who borrow for college, handled its $1.4 trillion student loan portfolio.

"The federal government must become a more responsible lender," Ms. DeVos said, and students "need to understand the implications of their decisions."

A version of this article appears in print on , on Page B4 of the New York edition with the headline: Education Dept. Will Cancel $150 Million in Loan Debt. Order Reprints | Today's Paper | Subscribe

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Education Dept. Will Cancel $150 Million in Student Debt After Judge's Order

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The Education Department is wiping $150 million in federal student loans off the books, and has begun the process of informing thousands of borrowers that they no longer owe the government money because the schools they attended shut their doors.

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DeVos tightens restrictions on Student Loan forgiveness

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DeVos tightens restrictions on Student Loan forgiveness

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In this article it goes into further detail on how DeVos further increased the problem of debtors out of college and it's effects on students. It also discusses how this could further stratify many young people from the older generation as they struggle to find housing because of this.

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Education Secretary Betsy DeVos is revising loan-forgiveness policies that the Obama administration set in motion after a wave of financial failures by for-profit colleges. Credit... Tom Brenner for The New York Times

Education Secretary Betsy DeVos on Friday significantly tightened Obama-era rules for student borrowers who say their schools defrauded them, imposing a deadline on claims and eliminating a requirement that the department automatically wipe away the loans of some students whose schools closed while they were enrolled.

The new rules apply to federal student loans made from July 2020 onward. They will replace a set of policies, completed by the Obama administration in 2016, that Ms. DeVos had delayed carrying out until a court ordered her to do so last year.

Under the new rules, borrowers seeking loan forgiveness will have much higher hurdles to clear. They will need to prove that their college made a deceptive statement "with knowledge of its false, misleading or deceptive nature or with reckless disregard for the truth," and that they relied on the claim in deciding to enroll or stay at the school. They will also need to show that the deception harmed them financially.

There is currently no time limit on submitting claims, but Ms. DeVos set a three-year deadline from the date that students graduate or leave their school.

"We believe that within three years, the borrower will know whether or not there has been misrepresentation," Diane Auer Jones, the Education Department's principal deputy under secretary, said Friday on a call with reporters.

The new rules also eliminate the "automatic closed school discharge," a program that wipes away the loans of students whose school closed before they could complete their degree. Students who do not transfer their credits elsewhere can apply to have their loans erased, but many do not know about the option and never apply.

The 2016 rules required the department to automatically eliminate their debts if the students did not enroll elsewhere within three years. That approach has contributed to the discharge of $222 million in loans owed by nearly 20,000 borrowers, according to Education Department data gathered by the National Student Legal Defense Network, an advocacy group.

The new rules from Ms. DeVos will cut debt forgiveness for borrowers by around $500 million a year compared with the 2016 rules if they were in full effect, the Education Department said in its draft of the changes.

The tightening of debt relief is the latest in a series of moves by the Trump administration to roll back Obama-era regulations aimed at for-profit colleges and universities. In June, Ms. DeVos officially repealed a rule that sought to crack down on for-profit colleges and universities that produced graduates with no meaningful job prospects and mountains of student debt they could not hope to repay. In 2018, the Education Department unwound a special unit detailed to investigate fraud in the for-profit sector.

Senator Richard J. Durbin, Democrat of Illinois, called the latest changes "another Trump-DeVos giveaway to their for-profit college cronies at the expense of defrauded student borrowers."

Consumer advocates said they planned to challenge the new rules in court. Rolling back the 2016 rules will "encourage schools to break the law, engage in risky practices that lead to abrupt closures and harm students with impunity," said Abby Shafroth, a lawyer with the National Consumer Law Center.

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Everest College in Industry, Calif., was among the campuses in the Corinthian Colleges chain that closed. Credit... Christine Armario/Associated Press

For two years, Ms. DeVos has "refused to follow existing law and cancel the loans for these students, leaving them in debt they can't get away from," said Eileen Connor, legal director of the Project on Predatory Student Lending. "Now, she's shredding a set of fair, common-sense rules that level the playing field between students and those who take advantage of them."

The federal government is the primary financier for Americans borrowing to attend college - it has made or backed more than $1.4 trillion in student loans to nearly 43 million people. Borrowers must repay their loans even if they drop out, are unhappy with their education or cannot find a job in the field they trained for.

But the government contracts include one escape clause: Borrowers can seek to have their loans eliminated if they can demonstrate that their school defrauded them or broke certain laws.

The clause, known as " borrower defense to repayment," was little used for decades, until a wave of large, for-profit chain failures began in 2014, when Corinthian Colleges collapsed. Caught off guard by a deluge of claims, the Obama administration struggled to create a process for managing and adjudicating them. It eventually approved or set in motion approvals on nearly 48,000 claims, many of them in the last few weeks of President Barack Obama's term, eliminating $600 million in borrower debt.

But when Ms. DeVos took over, the process stalled. The department had nearly 180,000 pending claims as of March 30, and had not approved or denied any in more than a year. Those cases must still be evaluated under the rules in place when the loans were made.

Many of the claims relate to false promises by for-profit schools about their graduates' career prospects. In a coordinated crackdown, state attorneys general and Obama-era federal regulators brought a series of lawsuits against schools that saddled students with high debts for subpar educations. Several large chains, including Corinthian and ITT Educational Services, went under.

The Obama administration granted full loan discharges to the borrower defense claims that it approved, but Ms. DeVos tried a new tactic, discharging only a portion of the debt owed by some Corinthian students. A federal judge in California blocked that approach last year, ruling that the department had violated privacy laws by improperly obtaining information from the Social Security Administration on individual applicants' earnings. The department appealed the decision and is waiting for a court ruling before it addresses those borrowers' claims, Ms. Jones said.

"We are diligently working to see if there is a different methodology we could employ so we can resolve those claims," she said.

Some people, like Jessica Jacobson, have been waiting for more than four years for a decision on their claim. In June, she and six others asked the federal court in the Northern District of California to compel the Education Department to make decisions on their cases.

Ms. Jacobson earned a bachelor's degree from the New England Institute of Art, which she hoped would lead to a career in visual effects. She picked the school, she said, because it marketed its industry connections and state-of-the-art technology. But the equipment was scarce and obsolete, she said, and the school's career support was limited to pointing students toward public job postings and giving them handouts like one titled "Tips for Applying to a Job From Craigslist."

After her graduation, Ms. Jacobson worked a succession of low-wage retail and restaurant jobs. The New England Institute of Art closed in 2017. The Massachusetts attorney general sued its former operators last year, accusing the school of predatory recruiting tactics and of deceiving students by misrepresenting its job placement rates.

Ms. Jacobson sent her borrower defense claim to the Education Department in March 2015, seeking to have $25,000 in federal loans forgiven. While the claim has been pending, she has held off on several major life decisions, including a marriage proposal from her boyfriend. If the claim is denied, she said, she does not want him to be ensnared in her debt.

"I'm in limbo," she said. "I don't know what the government is going to decide to do, and this debt is just hanging over my head. I feel trapped by it."

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DeVos Toughens Rules for Student Borrowers Bilked by Colleges

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Education Secretary Betsy DeVos on Friday significantly tightened Obama-era rules for student borrowers who say their schools defrauded them, imposing a deadline on claims and eliminating a requirement that the department automatically wipe away the loans of some students whose schools closed while they were enrolled.

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Trump vetoes Student Loan relief bill by Democrats

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Trump vetoes Student Loan relief bill by Democrats

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The recent bill which Congress passed to give relief to students during the COVID pandemic was vetoed by President Trump. The effects of this are discussed in the article and look to how DeVos further exacerbated the problem by making it even more difficult for students to receive relief.

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Stringent new rules by Education Secretary Betsy DeVos are set to take effect on July 1 after the attempt to reverse them was defeated.

Education Secretary Betsy DeVos's changes raised the bar for borrower relief claims, requiring applicants to individually prove that a school knowingly misled them. Credit... Anna Moneymaker/The New York Times

WASHINGTON - The House tried and failed on Friday to invalidate stringent rules imposed by the Trump administration on student loan forgiveness, falling short of overriding a veto by President Trump.

The override effort, which would have revived bipartisan legislation to overturn regulations put in place last year by Education Secretary Betsy DeVos, failed by a vote of 238 to 173, lacking the two-thirds majority it would have needed to pass. Six Republicans joined every Democrat in voting to defy Mr. Trump's position.

"It was important to try," said Representative Susie Lee, Democrat of Nevada, who led the effort. "You have 350,000 students in this country who are waiting for relief.

"They can't get on with their lives," she added. "This is a rule that's clearly stacked in favor of predatory schools and against students."

The new rules, which make it much more difficult for students who say their schools defrauded them to have their loans forgiven, are now set to take effect July 1.

The president vetoed a bipartisan bill last month to reverse Ms. DeVos's rules, which toughened standards established under the Obama administration for student borrowers seeking to have their federal loans erased after claiming their colleges defrauded them. Under the new regulations, even if borrowers could show they were victims of unscrupulous universities, they could still be denied relief unless they could prove their earnings had been adversely affected.

Ms. DeVos's move was met with backlash from veterans' organizations who argued that it would harm former service members who had been bilked by unscrupulous for-profit colleges. Speaker Nancy Pelosi of California called the new rules "an act of staggering cruelty."

Those sentiments were echoed on the House floor on Friday during debate.

"The American people do not support Betsy DeVos," said Representative Pramila Jayapal, Democrat of Washington, who argued the secretary was seeking to reward "predatory for-profit colleges" at students' expense. "The people's House stands on the side of the people, and not Betsy DeVos."

Representative Alma Adams, Democrat of North Carolina, took particular issue with arguments from the Trump administration that the rule protects historically black colleges and universities.

"No H.B.C.U. has ever been implicated," Ms. Adams said. "That's fake news."

Republicans, however, argued the new rules shielded colleges from students who run up debts they simply did not wish to pay.

"The Obama administration used this process to advance an ideological loan-forgiveness scheme," argued Representative Lloyd K. Smucker, Republican of Pennsylvania.

Representative Steve Watkins Jr., Republican of Kansas, called the Obama-era regulations "costly" and said they led to "abuse."

At issue is a little-known loan forgiveness rule, called "borrower defense to repayment," that was the main vehicle the Obama administration used to grant debt relief to tens of thousands of students affected by the collapse of two large for-profit college chains, Corinthian Colleges and ITT Tech, in 2015 and 2016.

Ms. DeVos said the Obama administration did not scrutinize claims in a way that was fair to colleges and taxpayers, and said she was reining in a process that amounted to "free money." She also said the Obama administration weaponized the rule to target for-profit schools.

Ms. DeVos's changes raised the bar for borrower relief claims, requiring each applicant to individually prove that a school knowingly misled them, and that he or she was financially harmed by the deception. They also set a three-year deadline on claims.

The department said the new rules would save taxpayers about $11 billion over the next decade.

"That's $11 billion that students who have been defrauded will now have to pay," said Representative Robert C. Scott, Democrat of Virginia.

Outraged by the changes, several groups, led by Veterans Education Success, began running advertisements on Fox News hoping to persuade Mr. Trump to reconsider. They argued the new rules did not protect military service members who had long been the targets of predatory tactics by colleges because of their lucrative G.I. benefits.

Ultimately, Mr. Trump sided with Ms. DeVos in arguing the Obama-era regulations were too broad in defining what amounted to educational fraud.

Despite the loss, Ms. Lee said she planned to revisit the issue soon.

"I will not give up the fight on this," she said. "I've actually spent a large part of the past several days calling my Republican colleagues, trying to find another path forward."

Erica L. Green and Emily Cochrane contributed reporting.

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House Fails to Override Trump's Veto Limiting Student Loan Debt Relief

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Stringent new rules by Education Secretary Betsy DeVos are set to take effect on July 1 after the attempt to reverse them was defeated. WASHINGTON - The House tried and failed on Friday to invalidate stringent rules imposed by the Trump administration on student loan forgiveness, falling short of overriding a veto by President Trump.

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Fortunately, some in House propose a Bill to freeze Student Debt

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Fortunately, some in House propose a Bill to freeze Student Debt

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(The only)Another article by Forbes is linked in the previous article and shows a bill being proposed by many Democrats who want to freeze student debt during the pandemic. Although this is a smalls step, it still is a step in the right direction, and is where we should be headed.

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WASHINGTON, DC - JULY 09: Speaker of the House Nancy Pelosi (D-CA) (Photo by Drew Angerer/Getty ... [+]
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As the debate over the next major stimulus package heats up, House Democrats will be voting today on a proposal that would suspend all payments, all interest, and all involuntary collections on private student loans for 12 months, through September 30, 2021.

Private student loans were excluded from the student loan relief provisions of the CARES Act. Some private student loan lenders offered emergency relief to borrowers, but this was not mandated by law, and was typically offered on a short-term, case-by-case basis. Emergency private student loan relief programs are ending this month for many borrowers.

The latest Democratic proposal mirrors a similar 12-month suspension of payments, interest and collections for federal student loans proposed by House Democrats in the HEROES Act, which passed the House in May on a largely party-line vote. The HEROES Act would also expand the 12-month student loan payment suspension to include commercially-issued FFEL-program federal loans, as well as federal Perkins loans. Taken together, today's proposal and the HEROES Act would effectively freeze all student loan payments and interest for over 40 million borrowers for 12 months.

Meanwhile, a Republican congressman has introduced legislation extending the CARES Act's suspension of federal student loan payments, interest, and collections by three months, through December 31, 2020. While this is a far shorter extension, this could be an indication that there is bipartisan appetite for extending existing student loan relief provisions by at least some amount of time.

Pausing student loan payments and interest would provide critical short-term relief for borrowers struggling with the fallout of the Coronavirus pandemic and economic recession. But some consumer advocacy organizations have argued that these temporary suspensions far short of what borrowers actually need. "Student debt cancellation offers a much more effective solution than short-term payment suspension," several such organizations argued in a recent letter to House and Senate leaders.

While the recent student loan relief proposals are being debated in the House, it is the Senate that ultimately is working on a new stimulus bill. A draft Senate bill could be released within the next one or two weeks.

Further Reading
Next Stimulus: Will There Be Student Loan Relief? Over 100 Civil Rights Groups Tell Congress: Cancel Student Debt In Next Stimulus Bill Rep. Ayanna Pressley: Cancel Student Loan Debt Now GOP Concerns Over Costs Could Limit Student Loan Relief In Next Stimulus Biden Reaffirms Plan To Cancel Student Debt, Reduce Racial Inequality NAACP And 60 Other Groups Call On Congress To Cancel Student Debt There Are Now Five Plans To Forgive Student Loans - How Do They Compare? Widespread Student Loan Forgiveness Is More Likely Now Than Ever Before - Here's Why
Follow me on Twitter or LinkedIn. Check out my website.

... Read More

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Democrats: Freeze All Student Loan Payments, Interest For 12 Months

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As the debate over the next major stimulus package heats up, House Democrats will be voting today on a proposal that would suspend all payments, all interest, and all involuntary collections on private student loans for 12 months, through September 30, 2021. Private student loans were excluded from the student loan relief provisions of the CARES Act.

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Student Loan Debtors still struggling heavily through the crisis

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Student Loan Debtors still struggling heavily through the crisis

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This article by Forbes is about the state of the Senate today and how even during a Pandemic, relief for debtors is still overlooked and treated unfairly. Many members of the Senate refuse to give benefits to Student Loan Debtors for seemingly no reason, or perhaps greed.

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WASHINGTON, DC - JUNE 23: U.S. Senate Majority Leader Mitch McConnell (Photo by Alex Wong/Getty ... [+]
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This story has been updated.
Negotiations between Senate Republicans and the White House continue today as GOP leaders try to craft a second stimulus bill. Currently, however, there are no indications that the proposal will include any additional relief for student loan borrowers.

Here's where things stand:

Senate and White House negotiators have apparently agreed to shelve a proposed payroll tax cut.

Unemployment benefits may be extended "based on approximately 70% wage replacement," according to Treasury Secretary Mnuchin.

There may be a second round of stimulus checks, but the exact amount of those checks - as well as any applicable income restrictions - is still being hammered out.

According to the New York Times, a working proposal would include over $105 billion for education-related spending, most of which would be earmarked for K-12 schools, and much of that would be conditioned on schools reopening for physical, in-person instruction.

So far, no lead Republican negotiators in either the Senate or the White House have indicated that any student loan relief will be included in the stimulus package.

However, the situation remains very much in flux, and lawmakers are nowhere close to finalizing a package. According to the Washington Post, there is still no Republican consensus on several key elements of the stimulus proposal, and the release of a final package may be delayed until next week. Some Republican lawmakers have proposed breaking up the stimulus package into smaller components, but House Speaker Nancy Pelosi (whose members would have to approve any Senate-passed stimulus package) has already rejected that approach.

Outside of the stimulus negotiations, Republican lawmakers have only proposed two recent student loan initiatives:

Meanwhile, House Democrats recently passed legislation providing for $10,000 in private student loan forgiveness for every borrower. The Senate is highly unlikely to take up that measure or include it in their stimulus proposal, however.

Further Reading
Democrats: Freeze All Student Loan Payments, Interest For 12 Months Over 100 Civil Rights Groups Tell Congress: Cancel Student Debt In Next Stimulus Bill Rep. Ayanna Pressley: Cancel Student Loan Debt Now GOP Concerns Over Costs Could Limit Student Loan Relief In Next Stimulus Biden Reaffirms Plan To Cancel Student Debt, Reduce Racial Inequality NAACP And 60 Other Groups Call On Congress To Cancel Student Debt There Are Now Five Plans To Forgive Student Loans - How Do They Compare? Widespread Student Loan Forgiveness Is More Likely Now Than Ever Before - Here's Why
Follow me on Twitter or LinkedIn. Check out my website.

... Read More

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Senate GOP Stimulus Bill May Include No Student Loan Relief

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This story has been updated. Negotiations between Senate Republicans and the White House continue today as GOP leaders try to craft a second stimulus bill. Currently, however, there are no indications that the proposal will include any additional relief for student loan borrowers.

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Twitter on Student Loan Debt and a Bill in the Senate

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Twitter on Student Loan Debt and a Bill in the Senate

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This tweet by the 'Student Debt Crisis' account linked to a Forbes article about how student loan debt is being overlooked by certain members of the Senate. I find it interesting that there is a verified account on twitter aimed at Student Loan Debt, which just shows the enormous extent of the problem.

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Shame! Americans with #studentdebt are hurting due to #COVID19 and @SenateGOP don’t want to offer relief. 

https://t.co/xMs8mG2SGm

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Shame! Americans with #studentdebt are hurting due to #COVID19 and @SenateGOP don’t want to offer relief. 

https://t.co/xMs8mG2SGm

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Shame! Americans with #studentdebt are hurting due to #COVID19 and @SenateGOP don’t want to offer relief. https://t.co/xMs8mG2SGm
— Student Debt Crisis Center (SDCC) (@DebtCrisisOrg) July 23, 2020

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Shame! Americans with #studentdebt are hurting due to #COVID19 and @SenateGOP don’t want to offer relief. 

https://t.co/xMs8mG2SGm

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Shame! Americans with #studentdebt are hurting due to #COVID19 and @SenateGOP don’t want to offer relief. 

https://t.co/xMs8mG2SGm

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Shame! Americans with #studentdebt are hurting due to #COVID19 and @SenateGOP don’t want to offer relief. 

https://t.co/xMs8mG2SGm

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This website gave a lot of information about Loan and Debt within the Federal Government, and was fairly unbiased open data. It was very interesting because it showed a lot of information over the years. and I could see loan debt rising quite steeply.

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From Wikipedia I was led to this website. It showed a lot of data of graphs about how student loan debt has gone up over the last few decades, and compares it to something like housing debt. It also gave a lot of information and predicted how debt would continue to rise if untreated. It showed a stark future for students.

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Young college graduates today are entering the workforce with an unprecedented amount of student debt. How does student debt relate to the economic outlook for younger Americans and the finances of the U.S. government?

In its annual Survey of Consumer Finances, the Federal Reserve Bank of New York reports on key data and trends surrounding student debt:

* At the end of 2017, nearly 45 million Americans owed a total of $1.4 trillion dollars in student debt.

* Young adults are more likely to be burdened with student debt than in the past and the average amount outstanding has grown significantly.

* Most student loans are disbursed directly by the federal government.

Student Debt Has Increased Substantially in Recent Years

While post-secondary enrollment has increased modestly in recent years, student debt has grown at a much faster rate. From 2004-2017, student debt quadrupled, rising from $345 billion in 2004 to nearly $1.4 trillion in 2017. In that same time, according to data from the National Center for Education Statistics, undergraduate student enrollment rose by approximately 15 percent and post-graduate enrollment by 17 percent.

How Does Student Debt Compare to Other Types of Household Debt?

Student loan debt is the second largest source of household debt in the United States. The largest source is mortgage debt, which totaled nearly $9 trillion at the end of 2017.

Since 2003, student debt has risen at the fastest rate of any other household debt and surpassed both auto loan and credit card debt in 2010.

More Young Adults are Burdened with Student Debt Today

Student debt has become significantly more prevalent among young adults since 1989. The percentage of households headed by Americans ages 25-34 that are burdened with student debt has more than tripled, from 15 percent in 1989 to 46 percent in 2016.

Young Adults Face Much Higher Student Debt Burdens than in the Past

In addition to the growth in the number of young adults who take out student loans for their education, the average dollar amount owed per household has increased as well. Even after adjusting for inflation, young adults in 2016 faced a much higher student debt burden than their historical peers.

Student Debt a Factor in the Declining Homeownership Rates Among Young Adults

Research by experts at the Federal Reserve Bank of New York indicates that the increasing amount of student debt is an important factor in the flagging homeownership rates of households led by Americans ages 25-34. In 1980, 55 percent of such households owned homes compared to just 38 percent in 2017. Home equity is a major contributor of retirement security, and delayed home ownership for young Americans can limit their long-term wealth accumulation.

Who Owns All This Student Debt?

The Department of Education reports that 92 percent of all current student debt is owed to the federal government, with private financial institutions lending the remaining 8 percent. That distribution is significantly different than a few decades ago. Prior to the 1990s, most student loans were subsidized and guaranteed by the federal government, but provided by private lenders under the Federal Family Education Loan (FFEL) program.

In 1992, the federal government implemented a new direct lending program. However, it was not until 2008, when large-scale credit market disruptions hampered the ability of many private lenders to make loans under FFEL, that the amount of direct loans from the federal government began rising substantially. Data from the Federal Reserve Bank of St. Louis show that in 2008, about $140 billion in student debt was directly loaned by the federal government; however by the end of 2017, total direct loans by the federal government had reached $1.15 trillion.

Image credit: Photo by Prasit Rodphan/Getty Images/iStockphoto

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Young college graduates today are entering the workforce with an unprecedented amount of student debt. How does student debt relate to the economic outlook for younger Americans and the finances of the U.S. government?

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Looking through the article, I get a sense of how college loans work for different countries and in America. It goes over the seeming victimization of Student Loans and overviews what these concerns are, but does not really delve deep into opinions on it or what others think about it.

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A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in the fact that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school. It also differs in many countries in the strict laws regulating renegotiating and bankruptcy. This article highlights the differences of the student loan system in several major countries.

Tertiary student places in Australia are usually funded through the HECS-HELP scheme. This funding is in the form of loans that are not normal debts. They are repaid over time via a supplementary tax, using a sliding scale based on taxable income. As a consequence, loan repayments are only made when the former student has income to support the repayments. Discounts are available for early repayment. The scheme is available to citizens and permanent humanitarian visa holders. Means-tested scholarships for living expenses are also available. Special assistance is available to indigenous students.

There has been criticism that the HECS-HELP scheme creates an incentive for people to leave the country after graduation, because those who do not file an Australian tax return do not make any repayments.

The province of British Columbia allows the Insurance Corporation of British Columbia to withhold issuance or renewal of driver's license to those with delinquent student loan repayments or child support payments or unpaid court fines. Students need to meet the qualification with an individual's direct educational costs and living expense to get the certificate to obtain a loan and this policy is directly controlled by the government.

New Zealand provides student loans and allowances to tertiary students who satisfy the funding criteria. Full-time students can claim loans for both fees and living costs while part-time students can only claim training institution fees. While the borrower is a resident of New Zealand, no interest is charged on the loan. Loans are repaid when the borrower starts working and has income above the minimum threshold, once this occurs employers will deduct the student loan repayments from the salary at a fixed 12c in the dollar rate and these are collected by the New Zealand tax authority.

The public sector is one of the most important sections in Thailand's higher education system. In addition, many public educational organizations usually receive profits from the students' tuition fees and the governments. Specifically, There are six various sections in the public sector's organization: colleges with the limited enrollment，universities which is opening to public, universities which is national autonomous, Rajabhat colleges, Ajamangala Universities of Technology, and polytechnic colleges.

Citizens in India show that the Indian Nation Loan Scholarship Scheme which operated from 1963 would make the extra waste on expenditure for the reason of 'limiting', which means only the people who really need to borrow would apply the student loan for the future education. Because of this, most Indian students would be more careful to choose their jobs in order to pay back the balance due.

The Indian government has launched a website, vidyalakshmi, for students seeking educational loans and five banks including SBI, IDBI Bank and Bank of India have integrated their system with the portal. Vidya Lakshmi was launched on the occasion of Independence Day i.e. 15 August 2015 for the benefit of students seeking educational loans. Vidya Lakshmi was developed under three departments of India i.e. Department of Financial Services, Department of Higher Education and Indian Banks Association (IBA).

To bridge the constraint of increasing institutional fees, NSDL e-Governance in India launched Vidyasaarathi portal to help students seeking scholarship for studies in India or overseas.

South Korea's student loans are managed by the Korea Student Aid Foundation (KOSAF) which was established in May 2009. According to the governmental philosophy that Korea's future depends on talent development and no student should quit studying due to financial reasons, they help students grow into talents that serve the nation and society as members of Korea. Normally, in South Korea, the default rate of redemption is related to each student's academic personalities. For instance, comparing with other majors, students in fine arts and physics are supposed to possessing a higher default rate. Therefore, students in such majors would be inclined to a higher rate of unemployment and a higher risk of default in redemption. Also, people will tend to have an inferior quality of human capital if the period of unemployment is too long.

Student loans in the United Kingdom are primarily provided by the state-owned Student Loans Company. Interest begins to accumulate on each loan payment as soon as the student receives it, but repayment is not required until the start of the next tax year after the student completes (or abandons) their education.

Since 1998, repayments have been collected by HMRC via the tax system, and are calculated based on the borrower's current level of income. If the borrower's income is below a certain threshold (£15,000 per tax year for 2011/2012, £21,000 per tax year for 2012/2013), no repayments are required, though interest continues to accumulate.

Loans are cancelled if the borrower dies or becomes permanently unable to work. Depending on when the loan was taken out and which part of the UK the borrower is from, they may also be cancelled after a certain period of time usually after 30 years, or when the borrower reaches a certain age.

Student loans taken out between 1990 and 1998, in the introductory phase of the UK government's phasing in of student loans, were not subsequently collected through the tax system in following years. The onus was (and still is) on the loan holder to prove their income falls below an annually calculated threshold set by the government if they wish to defer payment of their loan. A portfolio of early student loans from the 1990s was sold, by The Department for Business, Innovation and Skills in 2013. Erudio, a company financially backed by CarVal and Arrow Global was established to process applications for deferment and to manage accounts, following its successful purchasing bid of the loan portfolio in 2013.

There are complaints that graduates who have fully repaid their loans are still having £300 a month taken from their accounts and cannot get this stopped.

In the United States, there are two types of student loans: federal loans sponsored by the federal government and private student loans, which broadly includes state-affiliated nonprofits and institutional loans provided by schools. The overwhelming majority of student loans are federal loans. Federal loans can be "subsidized" or "unsubsidized." Interest does not accrue on subsidized loans while the students are in school. Student loans may be offered as part of a total financial aid package that may also include grants, scholarships, and/or work study opportunities. Whereas interest for most business investments is tax deductible, Student loan interest is generally not deductible. Critics contend that tax disadvantages to investments in education contribute to a shortage of educated labor, inefficiency, and slower economic growth.

Prior to 2010, federal loans were also divided into direct loans (which are originated and funded by the federal government) and guaranteed loans, originated and held by private lenders but guaranteed by the government. The guaranteed lending program was eliminated in 2010 because of a widespread perception that the government guarantees boosted student lending companies' profits but did not benefit students by reducing student loan costs.

Federal student loans are less expensive than private student loans. The interest rate of borrowers with federal student loans is nearly equal to the weighted average rate on the former loans while the new interest rate of private loans depends on the one-month London interbank offered rate. Therefore, these two student loans are different in both application and definition. Losses on student loans are extremely low, even when students default, in part because these loans cannot be discharged in bankruptcy unless repaying the loan would create an "undue hardship" for the student borrower and his or her dependents. In 2005, the bankruptcy laws were changed so that private educational loans also could not be readily discharged. Supporters of this change claimed that it would reduce student loan interest rates; critics said it would increase the lenders' profit.

Students can apply loans to Stafford Loans with no risks; and there are around 1000 banks, like J.P. Morgan Chase, engaged in the student loan project. Besides, students can also think about applying for student loans with the Department of Education which enable any school to take part in its Direct Loan project.

Federal aid policies expanded loan eligibility and shifted from grants to loans starting the rising student debt. The Federal Pell Grant, a form of federal aid for higher education students that does not need to be re-paid, only provides a maximum annual grant of $6,195 per student for the 2019-2020 award year. With the average annual tuition cost for a four year in-state public university averaging $26,590 for the 2019-2020 academic year, many students are forced to take out student loans to bridge the gap between grants and their annual tuition costs. More students over the years have been actively enrolled in universities, with for-profit universities enrollment growing by over 5 million in the past 10 years. For-profit universities enroll only 10% of the nations active college enrollment, yet hold nearly 20% of all federal student loan. States have also deprived public support and shifted the financial burden onto students by increasing the cost of tuition. With the median family income on a steady decline each year since 2007 up until 2012, it saw increasing difficulty for students to pay back college tuition out of savings and labor income. Between 2002 and 2012, public spending on education dropped 30%, while total enrollment at public colleges and universities jumped 34%. In a study conducted by the Federal Reserve Bank of St. Louis found that approximate $140 billion in student debt was loaned directly by the federal government, but by 2017, the federal government had reached $1.15 trillion.

The Income-Based Repayment (IBR) plan is an alternative to paying back federal student loans, which allows the borrowers to pay back loans based on how much they make, and not based how much money is actually owed. Income-based repayment is a federal program and is not available for private loans.

IBR plans generally cap loan payments at 10 percent of the student borrower's income. Deferred interest accrues, and the balance owed grows. However, after a certain number of years, the balance of the loan is forgiven. This period is 10 years if the student borrower works in the public sector (government or a nonprofit) and 25 years if the student works at a for-profit. Debt forgiveness is treated as taxable income, but can be excluded as taxable under certain circumstances, like bankruptcy and insolvency.

Scholars have criticized IBR plans on the grounds that they create moral hazard and suffer from adverse selection. That is, IBR and PAYE encourages students to borrow as much as possible for as long as possible and largely for personal (indirect) expenses (not tuition and fees), particularly at the graduate level where there is no limit on borrowing (up to $138,500 in Staffords plus unlimited Graduate plus loans) and steer those who could have obtained high-wage jobs to take low wage jobs with good benefits and minimal work hours to reduce their loan payments, thereby driving up the cost of the IBR program. And, if IBR programs are optional, only students who have the highest debts relative to wages will opt into the program. For example, due to formula to qualify, the vast majority of students with debts exceeding $100,000 will qualify even if earning at or near the median salary, thus they have no incentive to borrow responsibly. Historically, a number of IBR programs have collapsed because of these problems.

Most college students in the United States qualify for federal student loans. Students can borrow the same amount of money, at the same price, regardless of their own income or their parents' incomes, regardless of their expected future income, and regardless of their credit history. Only students who have defaulted on federal student loans or have been convicted of drug offenses, and have not completed a rehabilitation program, are excluded. Borrowers from families with low income with separation are more tend to default than those from higher-income families. Also, borrowers entering repayment after sophomore are more likely to default.

The amount students can borrow each year depends on their education level (undergraduate or graduate), and their status as dependent or independent. Undergraduates are eligible for subsidized loans, with no interest while the student is in school. Graduate students can borrow more per year. (Graduate and professional schools are expensive and less aid of other types is available.)

Private lenders use different underwriting criteria, including credit rating, income level, parents' income level, and other financial considerations. Students only borrow from private lenders when they exhaust the maximum borrowing limits under federal loans. Several scholars have advocated eliminating the borrowing limit on federal loans and enabling students to borrow according to their needs (tuition plus living expenses) and thereby eliminating high-cost private loans.

Federal student loan interest rates are established by Congress and listed in § 20 U.S.C. § 1087E(b). Because the interest rates are established by Congress, interest rates are a political decision. In 2010, the federal student loan program ran a multibillion-dollar "negative subsidy", or profit, for the federal government. Loans to graduate and professional students are especially profitable because of high interest rates and low default rates. Usually, the net flow of the default rate on student loans are strongly related to the nontraditional issuer and the flowing price of the tangible assets, unlike buildings or land.[clarification needed ] However, in contrast to the positive correlation with the borrower, a change in the price normally leads to negative influence on default rate. These two aspects have been used to explain the Great Recession of student loan default, which had grown to nearly thirty percent.

Some experts[specify ] believe that the education of workers would bring societal benefits such as reducing stress on public services, reducing medical expenses, increasing incomes, and promoting employment rates. These people propose that federal student loan rates should be adjusted with specific courses, relative to the rate of risk and societal returns from various studies.

Normally, repayment starts six months after graduation or leaving school.

It is important to note[according to whom? ] that financial relief can provide a safety net for those under intense pressure to repay, leading many towards gaining income and avoiding defaulting.

With federal student loans the student may have multiple options for extending the repayment period. An extension of the loan term will reduce the monthly payment and increase the amount of total interest paid on the principal balance during the life of the loan (the unpaid interest and any penalties become capitalized, i.e. added to the loan balance). Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income-based repayment plans and hardship deferments.

The Master Promissory Note is an agreement between the lender and the borrower that promises to repay the loan. It is a binding legal contract.

In coverage through established media outlets, many borrowers have expressed feelings of victimization by the student loan corporations. There is a comparison between these accounts and the college credit card trend in America during the 2000s, though the amounts owed by students on their student loans are almost always higher than the amount owed on credit cards. Many anecdotal accounts of the hardships caused by excessive student loan debt levels are chronicled by the organization Student Loan Justice which is founded and led by consumer rights advocate and author Alan Collinge. Student loans cannot be discharged in a bankruptcy proceeding unless the debtor can demonstrate "undue hardship." After the passage of the bankruptcy reform bill of 2005, even private student loans are not discharged during bankruptcy. This provided a credit risk free loan for the lender, averaging 7 percent a year.

In 2007, Andrew Cuomo, then Attorney General of New York State, led an investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with " kickbacks". This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers.

The biggest lenders, Sallie Mae and Nelnet, are frequently criticized by borrowers. These lenders often find themselves embroiled in lawsuits, the most serious of which was filed in 2007. The false claims suit was filed on behalf of the federal government by former Department of Education researcher Jon Oberg against Sallie Mae, Nelnet, and other lenders. Oberg argued that the lenders overcharged the U.S. government and defrauded taxpayers of millions and millions of dollars. In August 2010, Nelnet settled the lawsuit and paid $55 million.

The New York Times published an editorial in August 2011 endorsing the return of bankruptcy protections for private student loans in response to the economic downturn and universally increasing tuition at all colleges and graduate institutions.

Since 2005, Bankruptcy reform lead debtors have to take the responsibility of private student loan debt in bankruptcy which can decline debtors' intention of reducing costly defaults to declare bankruptcy.

As of 2013, many economists are predicting a new economic crisis will emerge as a result of an estimated $1 trillion of student loan debt currently impacting two thirds of graduating college students in America. However, most economists and investors believe that there is no student loan bubble.

The loan scheme for Hong Kong students was introduced in 1969. This scheme aimed to help full-time students at two universities: the Chinese University of Hong Kong and Hong Kong University. The program was extended in 1976 to cover full-time students in the Hong Kong Polytechnic, and further extended in 1982 to cover post-advanced level students in the Hong Kong Baptist College. In 1984 loans were expanded to include students in the new city Polytechnic. The scheme is controlled by the secretary of the University and Polytechnic Grants Committee, which is advised by the Joint Committee On Student Finance. The applicant of the loan scheme must have resided or been domiciled in Hong Kong for three years immediately prior to application. In 1990, a new government office, the Student Financial Assistance Agency, was also established to coordinate the administration of the student loan scheme.

Manning, Robert D. (1999). "Credit Cards on Campus: The Social Costs and Consequences of Student Debt." Washington, D.C.: Consumer Federation of America.

Schemo, Diana Jean, "Private Loans Deepen a Crisis in Student Debt", The New York Times, June 10, 2007

"New Default Rate Data for Federal Student Loans: 44% of Defaulters Attended For-Profit Institutions", The Pew Charitable Trusts, Project on Student Debt, Berkeley, California, December 15, 2009

Studentaid.ed.gov on Federal Perkins Loan Teacher Cancellation

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A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in the fact that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school.