Our financial system is crumbling this week.

[lukethedrifter]

Have we not discussed the financial aid bubble around here?

Used to be student loans were a great deal and you didn't have to do a lot of due diligence to not get screwed. That is not the case now. We can blame the "dummies" or we can, once again, look to the market looking to get rich.

[planet planet]

We recently got a mortgage at 3.25% and have student loans at 6.8%. Even with assets to cover what would have been half of a combined loan (house + student loans), we weren't allowed to roll the student loan amount into the mortgage. The only reason I got was something vague like 'regulations'. I don't know. Seemed pretty dumb.

Isn't that because federal student loans are pretty much the only thing that can't be discharged in a bankruptcy? Jocephus makes some very good points and am also torn on the topic of complete student loan forgiveness. Obviously any major initiative is going to have to be paid out of federal taxes and I'm not sure that this issues takes the front of the line for me when people are losing pensions promised to them that they were relying upon late in life, diminishing social security and welfare payments, etc.

[lukethedrifter]

I think that student loans and water bills should be the same. The first 100 gallons is free.

[pioneer98]

Have we not discussed the financial aid bubble around here?

Used to be student loans were a great deal and you didn't have to do a lot of due diligence to not get screwed. That is not the case now. We can blame the "dummies" or we can, once again, look to the market looking to get rich.

We tried to fix the economy by making mortgages cheaper. This blew up spectacularly. We are trying to make college cheaper by making the loans cheaper. This is liable to blow up.

The only solution is to make college cheaper...There are 2 ways to do this:
1) Reduce demand for college. The only way to do that is to have more and better jobs that don't require a degree. This is extremely unlikely to happen, although I don't know how we got to where we are, and why we don't have more "apprenticeship" career paths.
2) Cut costs. There are a ton of ways they can be more efficient. There is no reason you can't get an online degree for very cheap. When I took some master's courses online, they had lectures I had to stream that were recorded like 3 years earlier. The course material doesn't change a ton, even for those courses. I don't understand why some online college hasn't disrupted the major colleges in the same way Uber has disrupted taxi service, or Amazon has disrupted retail, etc...

[pioneer98]

The reason colleges can give away student loans to literally anyone is because of the dumb law that they can never be vacated even if the person declares bankruptcy. There is no risk in giving out these loans, other than it taking longer to get their money back. If this provision was taken away, they'd be WAY more careful about who got loans. It's easy to blame the person going for the basket weaving degree for having too much debt...but think about it: someone had to think giving that student all those loans was a good idea. They are equally dumb, if not dumber, because they are the ones supposed to be smart about money - it's kinda their whole job.

[Arthur Dent]

We tried to fix the economy by making mortgages cheaper. This blew up spectacularly.

No.

[AWvsCBsteeeerike3]

We recently got a mortgage at 3.25% and have student loans at 6.8%. Even with assets to cover what would have been half of a combined loan (house + student loans), we weren't allowed to roll the student loan amount into the mortgage. The only reason I got was something vague like 'regulations'. I don't know. Seemed pretty dumb.

Isn't that because federal student loans are pretty much the only thing that can't be discharged in a bankruptcy? Jocephus makes some very good points and am also torn on the topic of complete student loan forgiveness. Obviously any major initiative is going to have to be paid out of federal taxes and I'm not sure that this issues takes the front of the line for me when people are losing pensions promised to them that they were relying upon late in life, diminishing social security and welfare payments, etc.

I'm not sure what that has to do with anything. If students want to pay the loans back in full, bankruptcy isn't really relevant. The student loan origination company would have been paid in full for the loans + interest. Unless you are trying to say the loan originators don't want the loans paid back in full up front so they can continue to collect 6.8% instead of just being paid off.... That's a pretty terrible piece of legislation if the intent is to prevent those entering the workforce from finding a more affordable loan after graduation. Like....it's so bad it should be criminal, really.

Anyway, I don't get it. Sure, you can't wipe out student loans by filing for bankruptcy. But, for those people just trying to pay them back, why not allow banks to buy that debt? It's a better situation for everyone except the people set to collect 6.8%

[Jocephus]

i'll also add i didn't work specifically with loans (i audited people, fun!) but i needed to know the basics. i've been out of that dept for over a year now so there may be some changes. i'll give the feds some credit, they did consolidate all their websites into one (re: student loans) and if you are interested its https://studentloans.gov/myDirectLoan/index.action

there's a lot of information on there...whether or not the student (borrower) reads it, well, who knows

i would also agree with the over-saturation of degrees...they may not "mean" as much as they used to. i personally, would argue that a lot of "blue collar"/manufacturing jobs are now overseas and/or robots thus lowering the demand on that workforce which then sends a portion to college but then theres no job out there for them. i personally would argue that american job creators suck.

[Arthur Dent]

We recently got a mortgage at 3.25% and have student loans at 6.8%. Even with assets to cover what would have been half of a combined loan (house + student loans), we weren't allowed to roll the student loan amount into the mortgage. The only reason I got was something vague like 'regulations'. I don't know. Seemed pretty dumb.

Not sure what you are asking here. Are you saying you had the cash to put more than 20% down on the mortgage? Or you wanted to borrow the maximum for the mortgage so you could use your existing saving to cover both the down payment and pay off the student loan at the same time?

Going through this right now, the mistake may be that you told them you were thinking of the mortgage as a way to pay off the student debt. The mortgage underwriter people seem to have some very odd old school rules, but once you get the mortgage, you can pretty much do what you want to pay off your student debt or whatever.

[AWvsCBsteeeerike3]

We recently got a mortgage at 3.25% and have student loans at 6.8%. Even with assets to cover what would have been half of a combined loan (house + student loans), we weren't allowed to roll the student loan amount into the mortgage. The only reason I got was something vague like 'regulations'. I don't know. Seemed pretty dumb.

Not sure what you are asking here. Are you saying you had the cash to put more than 20% down on the mortgage? Or you wanted to borrow the maximum for the mortgage so you could use your existing saving to cover both the down payment and pay off the student loan at the same time?

Going this right now, the mistake may be that you told them you were thinking of the mortgage as a way to pay off the student debt. The mortgage underwriter people seem to have some very odd old school rules, but once you get the mortgage, you can pretty much do what you want to pay off your student debt or whatever.

Not really asking, just complaining.

I'm not incredibly well versed in the art of banking, so I didn't really know how to ask it. Once we settled on a bank, I asked the sales rep if there was any way we could expand the scope of the loan to include the student loan or get extra money to put towards the student loan and then repay that as part of the mortgage payment, or pay it back separately, or do anything within reason to get more money at that 3.25% rate that we could put towards the student loans.....obviously that would have been ideal.

The rep said there wasn't a way to do that without initiating a new loan application. He didn't know why, he just knew the answer was no and mumbled something about regulations.

Continuing my gripe, it's just stupid that they didn't give us the money to pay off the student loan and charge us the 3.25% interest. Here's why, imo:
1. By helping us lower payments on the student loans, they increase our financial health which in turns increases the likelihood we are able to pay back the mortgage.
2. By loaning more money, they make more money.
3. We're paying back money at 3.25% instead of 6.8%. This is obviously better.
4. This just more of a [expletive]....but they know how much we owe in student loans. They're obviously comfortable with us paying it back or else they wouldn't loan us money for a house. Why not just buy the debt at that point instead of playing 2nd fiddle to the student loan company and hurting the clients in the process? Seems stupid.