Defense Cuts? How about Changing Lending for Higher Ed?

Apparently CBS had this video removed from YouTube, but here is another copy.

Watch it quick before it's gone.

http://revolutionarypolitics.tv/video/v ... o_id=15915

The problem with federal student aid is that it, like the housing loans, is given to anybody and everybody who asks. There are almost no checks on who gets education aid, no matter what they're studying or how much they do or don't earn. The colleges and universities around the country realized this change in financing was happening and started charging accordingly - fees for colleges over the past 25 years have increased at 2.5 times the rate of inflation, with an overall increase of 455% in that 25-year span.

All that student borrowing went into the pockets of the schools. That's why there are so many schools out there offering so much mediocre education - it has been a money grab for over two decades now - and still, there are way too many unemployable and/or poorly educated/poorly skilled workers out there...and people who just soak the system from start to finish, like this guy. And in the end? These same borrowers are now frighteningly indebted to the federal government for their overpriced education.

More great management of our tax dollars by the federal government.

Frankly, when it comes to government spending, every program it has needs to be examined and overhauled. Accountability together with bilking the system are the primary issues.

Good news -

In order to receive federally subsidized student loans, you must be a verified enrolled student, enrolled in a degree-seeking program at an accredited institution of higher education - AND making satisfactory academic progress.

While fraud certainly does occur - it's becoming very hard. The federal government has (appropriately) clamped down in this area over the past few years.

Sure - student loan defaults are up, right now (as are all loan defaults).

The primary cost borne by the federal government would be the cost of interest subsidies (loans deferred due to enrollment or economic exigency).

The cost of a default is paid for by loan guarantee companies (every borrower pays a fee for the loan guarantee).

bailey bud wrote: Good news -

In order to receive federally subsidized student loans, you must be a verified enrolled student, enrolled in a degree-seeking program at an accredited institution of higher education - AND making satisfactory academic progress.

While fraud certainly does occur - it's becoming very hard. The federal government has (appropriately) clamped down in this area over the past few years.

Sure - student loan defaults are up, right now (as are all loan defaults).

The primary cost borne by the federal government would be the cost of interest subsidies (loans deferred due to enrollment or economic exigency).

The cost of a default is paid for by loan guarantee companies (every borrower pays a fee for the loan guarantee).

Those conditions for receiving a loan - enrollment verification, in a degree-seeking program, at an accredited institution, and making satisfactory (B? C?) progress, are so easily met, it's stupid. That last one - satisfactory progress - is not verified by the feds and if a student needs to retake a class to earn a higher grade the second time around to advance in his degree program, the school isn't going to stand in his way, they just take the funds - again. Who guarantees the loan guarantee companies? Isn't that another name for... bank? Or is it.... Sallie Mae - both of which would mean, the buck stops with the feds again?

The closer I look, the more obvious the cancerous spread of government spending, lending and financial intrusion into the free market system.

Anytime we resign ourselves to buying a product on credit we end up paying more for less. The use of loans for everything in this country is a great evil.

Loans are guaranteed by regional guarantee agencies.

The agencies are funded by a part of the origination fee (the fee is determined by the risk of default in the region).

The loans are not even guaranteed for the full value.

Want to know the sucky part ---- guarantee agencies are no longer in their business --- the federal government is taking the guarantee business away. Apparently, the government feels it can do the job better.

http://www.finaid.org/loans/guaranteeagencies.phtml

Sallie Mae (SLM) was a government sponsored enterprise (GSE) turned publicly traded corporation. However, with a shift toward 100% federal lending --- SLM is reduced to a holding and service company.

bailey bud wrote: Loans are guaranteed by regional guarantee agencies.

The agencies are funded by a part of the origination fee (the fee is determined by the risk of default in the region).

The loans are not even guaranteed for the full value.

Want to know the sucky part ---- guarantee agencies are no longer in their business --- the federal government is taking the guarantee business away. Apparently, the government feels it can do the job better.

http://www.finaid.org/loans/guaranteeagencies.phtml

Sallie Mae (SLM) was a government sponsored enterprise (GSE) turned publicly traded corporation. However, with a shift toward 100% federal lending --- SLM is reduced to a holding and service company.

BB, earlier you said, "The cost of a default is paid for by loan guarantee companies (every borrower pays a fee for the loan guarantee)."

It's not that hard to do but you are confusing me.

the loans that were originated under the old system remain guaranteed by the (non-profit) guarantee agencies.

Those agencies handled the guarantee function - while (for profit) lenders managed the loan servicing.

The loans being originated now (and henceforth) are guaranteed by the government.

(yes - higher education finance is confusing as hell - that's because the government is running it)