1. Captain Obvious: Student Loans

    Well, here’s a surprise from student-loan land. Not.

    ABC News: Lax Student Loan Standards Created Debt Crisis

    This, obviously, was a topic which required a bureaucratic government study, and so we got one. From it we get amazing and startling new findings, guaranteed to drop jaws … findings like these:

    From 2005 – 2007, the report found that school involvement in student loans began to shrink and students began borrowing more than necessary. And, lenders began making exceptions for students with lower credit scores.

    Private lenders gave out money without considering whether borrowers would repay, then bundled and resold the loans to investors to avoid losing money when students defaulted.

    Those practices are closely associated with subprime mortgage lending, which inflated the housing bubble and helped bring about the 2008 financial crisis, according to the Associated Press.

    Huh. That’s weird. I know a guy who compared student-loan lending to subprime lending way back in 2010.




  2. Debit Card Drawbacks

    I’ve mentioned it numerous times on IYM: Debit cards are a great tool, but they have serious drawbacks, too. And there are some things for which they’re totally unacceptable.

    Cue the piece from USA Today:

    USA Today: Debit Card Holds Can Derail Travel Plans

    Dave Ramsey loves to talk up debit cards, but as the article tells us, there are times (vacations, for one) when you really ought to keep that particular slab of account-zapping plastic tucked in your pocket.

    What makes debit cards even worse? Well, as my daily dealings with Joe Q. Public have taught me, there are still a great many folks who have no idea how debit-card daily limits and hold policies actually work. (Though, to be fair, most people also have no idea how their credit-card policies work, either, so why would it be any different for debit cards?)



  3. Idea: End Student Loans Altogether

    Whilst I haven’t yet finished reading the whole piece, the title made it just too good to not share ASAP:

    Bloomberg: Forget “Cheaper” … Just End Student Loans

    What — you mean supply and demand matters, even in higher ed? Pffft. When did that start? [/snark]



  4. Too Broke for Bankruptcy

    Whaddya mean, they made bankruptcy too expensive to pursue? Say whaaaa?

    Yahoo Finance: Too Broke to Go Bankrupt

    Apparently, calling “Bankrupt!” and getting a do-over ain’t as cheap as it used to be. But then, what is?

    My favorite quote from the article reads thusly:

    Billy Brewer, president of the National Association of Consumer Bankruptcy Attorneys, said bankruptcy attorneys have no choice but to charge such high fees.

    “When clients come in and I tell them the fee, they look at me like I have two heads, and say: What part of ‘I’m filing for bankruptcy don’t you understand?’ But we can’t afford to do it for free,” said Brewer, who charges an average fee of $1,500. “Congress decided to make the process much more difficult and there’s much more paperwork involved, so attorneys are spending double the time they used to just to help someone file.”

    Well, I’m sure this was a completely unintended consequence of the 2005 bankruptcy legislation.




  5. Pro Athletes Going Broke

    Well, if you were wondering just how great professional athletes are at managing their money, Sports Illustrated has the ticket:

    SI: How And Why Athletes Go Broke

    As far as the article goes, here’s your two-minute drill:

    In a less public way, other athletes from the nation’s three biggest and most profitable leagues—the NBA, NFL and Major League Baseball—are suffering from a financial pandemic. Although salaries have risen steadily during the last three decades, reports from a host of sources (athletes, players’ associations, agents and financial advisers) indicate that:

    • By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.

    • Within five years of retirement, an estimated 60% of former NBA players are broke.

    I mean, those figures are just plain brutal. But not surprising.

    It’s a very long article, as these things go, but well worth a read if you follow pro sports and athletes (and their foibles).



  6. Daily Student-Loan Idiocy

    Man, I could practically write a standalone blog just on the topic of student loans, couldn’t I? I mean, the fodder is everywhere.

    Bloomberg: Student Borrowers Lack Understanding of Loan Terms

    This little snippet is pretty darn tough to ignore:

    Marjorie Gelin Goodwin, 37, one of the respondents, said she owes about $107,000 in federal loans and about $15,000 in private loans for college and graduate school. She is in forbearance on her federal loans, meaning she isn’t making payments. She didn’t understand that her private loans would have a variable rate that could fluctuate so greatly, she said in an interview.

    “I was surprised by how much my student-loan payments would take away from my income,” said Goodwin, who works at a nonprofit organization in San Francisco. “I’ll be retired and still paying my student loans at the rate I’m going.”

    You just really have to read that article. As that great philosopher, Homer Simpson, might say:

    “The stupid, it burns!”



  7. House Prices Suffer From Student-Loan Debt (But Colleges Seem Happy)

    For today’s “LOL” moment, I proudly present to you:

    Businessweek: Student Debt Is Stifling House Prices

    It’s pretty darn comedic when you think about it: A pharmacist earning $125k/year, and carrying $100k in student loans, is miffed that she can’t — for some unfathomable reason — go out and buy a home. Like, yesterday.

    Roshell Schenck has a Ph.D. in pharmacy and earns $125,000 a year. Yet, because she has more than $110,000 in student loan debt, counselors have told her she can’t qualify for a mortgage. “I’d love to buy and can afford to buy,” says the 28-year-old graduate of Lake Erie College of Osteopathic Medicine in Erie, Pa. With lenders scrutinizing college loans more closely than in previous years, it’s almost impossible for borrowers such as Schenck to get approved for mortgages. “My debt is crushing my chances of purchasing a home.”

    Roshell, say hello to my esteemed colleague, the Law of Unintended Consequences. Kinda crazy, isn’t it, how these days, the debt you’re already carrying seems to matter again? And, darn the bad luck, it’s mattering just when you’d really like to borrow even more! Ain’t that a kick in the pants!

    It’s not that I don’t have some sympathy for grads like Ms. Schenck. The situation she finds herself in — making a really nice income in a good field, but unable to qualify for a home loan due to six digits of student-loan debt around her neck — isn’t entirely of her own doing. After all, the government and our university system forced her to take out those loans—

    Okay, never mind. It IS entirely of her own doing.

    Look: She’s fortunate to be making the money she is. I mean, I would love to have an income like that.

    But only if there’s not $100k+ of debt attached to it.

    But She Wants It Now

    By my reckoning, Ms. Schenck makes enough money that paying back those student loans should be no biggie, in the grand scheme of things. A few years of scrimping, saving, and consistent four- and five-digit extra payments toward those loans, and she’ll be in fine shape.

    Admittedly, though, this concept works only if she goes all Dave Ramsey on it, and can manage to not play “Keep up with the Joneses” as regards her spending habits. (Yes, that dreaded disease which ravages so many of the high-earning types, like doctors, lawyers, pharmacists, and so on. Lots of money comes in the door, sure … and even more of it goes out. Wouldn’t want to not “look the part.” Heavens, no.)

    Back to the article:

    Recent college graduates carry an average debt load of more than $25,000, limiting their ability to qualify for mortgages even if they’re able to land a job in a market with an unemployment rate of 9 percent for 25- to 34-year-olds. Dubbing it a “student loan debt bomb,” the National Association of Consumer Bankruptcy Attorneys (NACBA) warned on Feb. 7 about the effects of rising student debt on recent graduates, parents who co-signed their loans, and older Americans who’ve gone back to school for job training.

    Well, the good news is that borrowing of federally-subsidized student-loan dollars shows no signs of abating. So colleges will remain free to increase tuition at will, year after year, with no danger of “decreased financial resources” or anything outlandish like that out there to slow things down.

    “Just as the housing bubble created a mortgage debt overhang that absorbs the income of consumers and renders them unable to engage in consumer spending that sustains the economy, so too are student loans beginning to have the same effect, which will be a drag on the economy for the foreseeable future,” John Rao, vice president of the NACBA, said on a conference call.

    Absolutely preposterous, says I. How great of a country can we be, really, when our citizens’ past borrowing proclivities keep us from borrowing skads more now, right at the time when we most need it? Pffft.

    I don’t know who came up with this silly idea that “Today’s choices create those of tomorrow,” but I don’t like it. And it seems like Ms. Schenck doesn’t, either. Since when should debt limit our choices? I mean, really.

    Someone should just, like, do something.



  8. How to Make College More Expensive

    For this, they needed a study? Really?

    SmartMoney: Why College Aid Makes College Cost More

    It’s pretty basic: The more money you make available for a limited good or service, the more that good or service will cost.

    This is what happened when “Fog a mirror, get a home loan” policies were all the rage in the early 2000s. It’s also why “Fog a mirror, get a student loan” policies are NOT the elixir for ever-increasing college tuition that everyone makes them out to be. Rather, they make the problem worse.



  9. Higher Debt-ucation

    From from the annals of Bloomberg comes this jewel:

    Bloomberg: Trapped by $50k Degree in Low-Paying Job…

    One of the reasons I’ve not spent a single word voicing my thoughts on the current Occupy Wall Street (OWS) saga is that while I agree with them on several counts (yes, Virginia, laws should apply to everyone equally, regardless of political stature or the size of one’s bank account), there are numerous “grievances” put forth by OWS which are simply ridiculous, and merit not a moment of my time nor consideration. One of these issues centers on student loans and higher-ed debt.

    So Here Comes My Opinion

    No, OWS, higher education is not a right, nor should it be. Student loans should not be forgiven on any sort of universal basis. I care not whether you could or couldn’t find a job suitable to make your loan payments, Ms. Occupy Protester, because I was not the one who decreed it necessary for you to attend said institution and take out big loans to do the same.

    Lament that mid-five-figures debt all you want, but the reason you have it is simply this: Government made it possible for anyone able to fog a mirror to sign their name on a few dotted lines and walk away with thousands of debt bucks, easily, for the glorious purpose of “higher” education. Take away that “easy” loan ability, and the demand for college goes down … as does the ability of college administrative boards to bump tuition and fees 8 to 15 percent per year. And down will come prices. Eventually.

    If anyone could step out and borrow $5k per year (or whatever) for your product, just by slapping their siggy on a form or two, then you’d be lifting your prices by double-digit percentages each year, too. The more money you make available for “something,” the more that “something’s” price goes up. (Pretty neat how well it worked for housing, too, huh?)

    Sold a Bill O’ Goods

    That’s exactly what happens to lots of college students, it appears. They’re being sold a bill of goods.

    Because if you, like Laura Sayer in the linked article above, run out and borrow $50k to get a Masters degree at NYU’s Program for Interdisciplinary Studies in Humanities and Social Thought, and then you’re upset to find that that degree doesn’t do jack squat for you in the Real World, well, I don’t know what to say.

    …Sayer was set back $50,000 more after completing the Interdisciplinary Master’s Program in Humanities and Social Thought at New York University. The 27-year-old now makes about $45,000 a year as an administrative assistant for a nonprofit group, a job that didn’t require her advanced degree.

    Hmmm. Seems to me that her advanced degree was much more of a years-long (and quite expensive) whim than any sort of career booster:

    Sayer, the NYU graduate, said while she learned critical-thinking skills, her career prospects won’t allow her to pay off her debt anytime soon. [Emphasis mine]

    “Even if I didn’t know what field it would lead me to, I thought it would be worthwhile for my professional career,” said Sayer, who lives in the Crown Heights neighborhood of Brooklyn with two roommates.

    No, really. The jokes practically write themselves.

    Many of the students who enroll in the master’s of “Social Thought” program directly from college do so with an eye toward a Ph.D., said John Beckman, an NYU spokesman.

    Of course they do. The masters won’t do a damn thing for them. Thus, they want to put off those student-loan payments as long as is humanly possible. Of course, that will probably require taking out more loans, but as we’ve previously established, student-loan lending isn’t exactly “restricted” to only the best credit risks. No credit? No job prospects? Already $40k in debt? No problem. There’s more where that came from.

    “The numbers have shown, and will continue to show, over time that an investment in an advanced degree will yield better career prospects and income,” Beckman said.

    Some salesman, this guy. You have to wonder if the people who wrote the theses below — previous NYU attendees in the “Social Thought” program — really believed that what they were studying had ANY BEARING WHATSOEVER on whether or not they’d achieve gainful employment at anything above poverty-level Mcwages:

    • The Graven Image: Truth, Self, and Identity in Max Frisch’s Novel I’m Not Stiller
    • The Meaning of Documentary: Narrativity, the Cartesian World View, and a Heideggerian Critique
    • H.D.’s Creation of the New: Redeeming the Maternal Body in Pursuit of Feminine Language
    • Why Are Gay Men So Effeminate? An Essay on Aesthetics, Affect, and White Gay Male Subjectivity
    • Speaking in Tongues: Language and Creolite in the Work of Kamau Brathwaite and Junot Diaz

    Readers, please tell me: Do the authors of these things actually want to WORK and create products or services of value to the rest of us, or do they just want their egos stroked and subsidized (preferably at taxpayer expense) on a regular basis?

    Methinks I know the answer.

    And I didn’t need to borrow $50k to achieve my “critical-thinking” skills.



  10. Which Decade Is He Referring To?

    Aside from the scalding melodrama of the headline, I found this to be a pretty interesting piece:

    Fiscal Times: This Rule Could Kill the Housing Market

    The gist of the article centers on a chunk of the recently-enacted Dodd-Frank legislation — a chunk which contains the onerous requirement that lenders must maintain on their balance sheets some share of the risk of mortgages they sell off to investors.

    Oh, the horror. Mortgage lenders retaining a sliver of the mortgage risk they create? Dear Lord, what legislative insanity will we birth next?

    No, really. While I tend to come down against Big Government most of the time, given what happened in 2008 and 2009, I’m pretty content with mortgage lenders being required to balance-sheet some risk from the mortgages they create. To me, this sounds like a burden our esteemed megabanks worked exceptionally hard to earn during those heady years of the mid-2000s.

    But get a load of this choice bit of idiocy:

    Even frequent critics of lender practices, such as the National Community Reinvestment Coalition and the National Consumer Law Center, have joined bankers and bank lobbyists in calling for regulators to rethink the rule.

    “The proposal as introduced will literally erase a decade of accomplishment in defining what is a responsible loan,” said David Berenbaum, chief program officer with the Coalition, an advocacy group for community organizations that support affordable housing and equal access to credit. “It is going to narrow the range of loans that lenders are willing to originate to the point that only consumers with the best credit scores—meaning white and affluent consumers—are going to get loans.”

    Say what? A “decade of accomplishment in defining what is a responsible loan?” Can this guy be serious? Or is his definition of “accomplishment” just far, far different from mine?

    I’m thinking it’s the latter.