USA TODAY: Warren says she would cancel student debt on Day 1, citing legal authority of Department of Ed

USA TODAY: Warren says she would cancel student debt on Day 1, citing legal authority of Department of Ed.

No, I am not trying to buy an election. Nope, nothing to see here.

I, personally feel this was an issue that the Republican Party got extremely wrong. When they made “student loans” immune to bankruptcy. But wow, you want to talk about kicking off another 2008 2.0 style financial crisis. This would be the way you do it.

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A federal court has already ruled so that it is easier to get rid of student debt in Bankruptcy proceedings. It is likely that the various institutions will begin to restructure debt in a more manageable fashion to avoid losing money loaned.
It is also time to get the government out of assisting speculative loans for jobs training and education. In the past various kinds of loans and scholarships existed. The explosion of college degrees for jobs did not occur until student loan money appeared.
The explosive growth of college costs is directly related to this influx of dollars largely coming from the various student loan programs that the government was involved in.
Already new forms of the student loans with various repayment schedules and a more sensible approach to debt are being found.
Warren is sadly out of focus on what is already occurring in this arena. Why is the press not holding her feet to the fire on this? But we have seemed to have lost the old professional press like the Morrows and Cronkite’s of very recent history. The idea of researching and presenting a balanced view based on verifiable sources has seemed to disappear Yellow journalism rules the day;

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My wife is the financial officer for a major University. The ruling, while having been made, has of now, fallen under the jurisdiction of the Secretary of the Department of Education. Secretary Devos, has so far, claimed that any relief must be reviewed by her on a case by case basis. Secretary Devos has not approved any injunctive relief to any student at the University my wife is the Financial Officer for.

You are absolutely correct that many Universities, Colleges and, especially egregiously, many “online” Institute’s of “higher learning” took shameless advantage of students, their families, because they “knew” that debt was secure.

Due to this systemic abuse, I know first-hand that many Universities do NOT accept school course credit hours transfers from the most egregious abuses of that “pay for grades” scenario.

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Just so I’m clear…

The people who have paid/been paying don’t get a full free ride but others do…paid for my those who already paid for their own?

Must be new math.

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The mere fact that a judge has held that this person could get relief is a step in the right direction. If Warren wanted to be prudent and actually take a responsible look at controlling this, she should so state. Eventually, this kind of debt may just become something that has to be written off. It won’t help the person that has this done. It may just be what happens.
Devos is still a political creature that must respond to her masters.

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Someone correct me if I am wrong because I am very confused here.

She wants to eliminate all student debt.

This is money owed to colleges/universities to help offset the cost of educating these same students.

Most of the liberal voting students were taught at these intuitions by liberal professors that will now have to take a pay cut as the intuitions will have to tighten their spending (or taxes will be raised yet again to help pay for the costs).

People will get to the point where they cant afford to pay the ever increasing taxes as the increases get closer and closer to half or more of their income.

Professors will then stop pushing the liberal agenda because it costs THEM money.

This equals less liberal voters in the future.

Maybe she is on the conservative’s side after all and is just not smart enough to realize it!

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Or it buys her every single College student with debt from College loans vote. Which then kicks off 2008 2.0

I know from doing the Forensic Accounting audit of the bank that kicked off the 2008 financial crisis, is that all it takes is one “to big to fail” entity to cause massive market destabilizing loss of confidence.

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As a college grad and with two kids in college, I will be the first to say that this is unfair. 75% of the population do not go to college and should not be on the hook for the bill of the those that do. I have long thought that education should be funded by a income tax rather than all the crazy methods we have today. Every kid who grows up to pay income tax would have money go back to the schools that he got his education in (kindergarten through whatever level of education they attended). This would encourage schools to turn out the best students they could because their future funding would depend on turning out people who earned a taxable wage.

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This is a very interesting take on student loan debt. Any links to more info on it, or is it your idea?

Devil’s advocate, would those who paid for their college or did not go have to pay income tax to pay for those that do, or only college folks pay that, and is it all, or those that graduate from college?

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Top of the post. :eyes::innocent:

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What about all the financial institutions that are not going to collect billions? Is the government still going to guarantee these loans? Do you think another bank will ever lend another dollar in student loans? With no student loans we will see enrollment dwindle and colleges shutdown. In the end, only the rich will go to college.

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The idea came from a discussion I was part of to turn the negative feed back loop of education around.

The origin was the belief that rural school districts don’t have the incentive to produce good students because they will move away for jobs and there is not any return on the investment. The flip side was that ‘big cities’ do not have an incentive either because of all the people moving to the city for the jobs… so no one would want to invest in local education. The idea that we came up with to solve it is that the schools that educated the individual would benefit no matter where they went to earn an income (and pay income tax).

I would say that if you paid out of pocket for your education you should be exempt from the tax. So if you went to private school and paid out of pocket for your college then the investment in your education was your own instead of the school who got paid up front for their efforts to educate you.

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So maybe this goes one of two ways…

  1. the government is holding the loan itself (the school already got paid) and its the government’s money that’s being given away.
  2. the loan is currently owned by a bank or investment group, in which case they’re going bankrupt.

I think when people are promising to give away OTHER PEOPLE’S MONEY - that should be considered theft. In the first case, theft of taxpayer’s funds, in the second, bank robbery or theft-by-coercion.

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Just how much of these billions are interest accrued. Just like when a house goes on the market. It goes on the market to actually recoup the original loan value plus expenses in foreclosing.
Sometimes the market is good and they get more money than these costs. Of course, they never tell the person that should have a legal claim to the difference that originally held the loan.
If the banks start to get ahead of this and are willing to forego some interest collected, they may actually not end up that bad in the long run. Not a perfect solution but a viable one. Collect nothing or collect something.

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If they are subsidized student loans, interest does not accrue until you finish school. And once you start paying, I would presume you are paying interest plus principal. If that is the case, the interest only accrues and is added to the principal only if your are not making your full payments. If unsubsidized, then yes, there would be interest added to the capital until you start making payments. At that point, it should be just like a subsidized loan where you are no longer adding to the debt once you start paining it.
And you are right, it would be in the interest of lenders to work out payment plans, including interest reduction, to protect the system.

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Two Kentucky schools, Bellarmine University costs $40000 a year and University of Louisville costs $11000 a year. Is the plan to wipe out the $44000 debt of the UofL student and the $160000 debt of the BU student?
I have a law degree from UofL that cost about $24000. My daughter has a law degree from Vanderbilt with tuition at about 48000 per year plus living expenses totaling 65000 a year and total loans of about $200000.
Both the Bellarmine and Vanderbilt degrees generally lead to higher earning potential. Do all of these get their debt forgiven? The average UofL law student will earn upwards of $100,000 at a large firm while the Vandy law graduate can expect to earn closer to $200,000 at a large firm. There is a problem with the equity in these situations.

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@MikeBKY

Mike,

If you are interested in seeing why this would be so catastrophic. Go to Jenner/ Block law firms web site
(Chicago, Illinois) and read archived books by Anton Voelkner (Federal appointed Bankruptcy Examiner for Lehman Brother’s bankruptcy). He was a partner at Jenner/Block. Special attention to books 8 & 9, those 2 books will show you why taking all of student loans out circulation would be disastrous.

At the core of the 2008 financial collapse, there was no underlying weakness in the economy that caused it. It was a lack of confidence by the market and the run on the banks as investors sold off their investments.

Yes, student loans may be in some percentages backed by the Government. But there are way too many that are not. Banks loan student financial aid as well. As it can not be discharged through bankruptcy. Yes there has been a court ruling against but the Department of Education, Secretary Devos is insisting that any loans to be “forgiven” must be reviewed on a case by case basis.

You can not arbitrarily remove $1.6 trillion + of debt from the economy ( 8% of the value of the US economy) without destroying it. Which would most likely cause another massive loss of confidence in the market and trigger another massive sell off of investments and create another 2008 financial crisis.

I am not Chicken Little on this. Under my mentor I spent 5+ years studying and analyzing the 2008 market collapse caused by the Lehman Brother’s collapse. There were literally thousands of accountant’s involved in assisting Anton Voelkner in distilling 3 billion plus pages of evidence into the 11 books that Anton Voelkner gave to the bankruptcy proceedings.

Senator Warren’s position on eliminating student loans would be catastrophic.

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What Senator Warren clearly does not understand is that debt is never “cancelled.” Someone pays - the creditor, the government or some other party.

Just like the rest of her “plans,” she has no clue how to pay for the votes she intends to buy with her actions.

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I’m trying hard not to right write too much for the sake of forumites…

  1. In order to create a solution, we need to clearly define the problem.
  2. Many people are finding themselves “underwater” in terms of pay scale of their vocations in relationship to the cost of their degrees.
  3. Is the solution better handled by 1. the government, 2. the universities handling the student programs, services, costs, etc., 3. the banks supplying the loans, or 4. by the students seeking a degree in whatever field they desire? I’m maintaining a free-market model related to job income.
  4. Are government policy changes required in order to make the changes to whichever answer we have to #3.
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