Warning Forum

[dowu]

[CanadianWolf]

One would think that the ABA would have put up a better fight, but they didn't.

[RedBirds2011]

I talked to a dean of a lower ranked state med school (like TTTT) and he said that it is extremely uncommon for a med student at his school to not get a job, you basically have to have a criminal record.[/quote]



Yea, it's true. I grew up around medicine and if you get into med school you are golden. The hard part is getting in not getting a job. So when I was introduced to the legal profession it absolutely blew my mind how prestige driven it was and how so many didn't get jobs just because of their school. It just struck me as absolutely fucking ridiculous and like an alternate nightmare reality. They absolutely need to make it a lot harder to get in across te law school board. Right now it's too easy.

[dowu]

talked to a dean of a lower ranked state med school (like TTTT) and he said that it is extremely uncommon for a med student at his school to not get a job, you basically have to have a criminal record.

Yea, it's true. I grew up around medicine and if you get into med school you are golden. The hard part is getting in not getting a job. So when I was introduced to the legal profession it absolutely blew my mind how prestige driven it was and how so many didn't get jobs just because of their school. It just struck me as absolutely fucking ridiculous and like an alternate nightmare reality. They absolutely need to make it a lot harder to get in across te law school board. Right now it's too easy.

Fuckin right doggy. The ABA needs to step in, if they want to save this shit. Otherwise, its only going to continue to get worse.

[rickgrimes69]

More law schools received ABA accreditation due to a lawsuit against the ABA several years ago. The best solution is to once again make student loans dischargeable in bankruptcy. This will drive tuition costs lower & poorly performing law schools (re: employment) out of business. Blame credit card company lobbying for the current mess since they had the bankruptcy laws changed in 2005.

Yessir, this is it right here. I also feel that it's highway robbery to charge any more than a 2% liquidity premium over inflation on loans which are non-dischargeable and backed by the government. There's virtually no risk to the lender, so how do they justify charging a risk premium?

[dingbat]

More law schools received ABA accreditation due to a lawsuit against the ABA several years ago. The best solution is to once again make student loans dischargeable in bankruptcy. This will drive tuition costs lower & poorly performing law schools (re: employment) out of business. Blame credit card company lobbying for the current mess since they had the bankruptcy laws changed in 2005.

Yessir, this is it right here. I also feel that it's highway robbery to charge any more than a 2% liquidity premium over inflation on loans which are non-dischargeable and backed by the government. There's virtually no risk to the lender, so how do they justify charging a risk premium?

Risks:
payments might not be made in a timely manner
Payments may be for a (much) lower amount than ecpected
Principal+interest may be reduced to zero after 20(?) years, even if less than interest payments have been made for duration of the loan

Not saying its justified, just stating the risks.
In finance, the biggest desire is predictability, which is the one element lacking in student loans.
Lack of predictability is the worst thing for a lender

[sundance95]

Risks:
payments might not be made in a timely manner
Payments may be for a (much) lower amount than ecpected
Principal+interest may be reduced to zero after 20(?) years, even if less than interest payments have been made for duration of the loan

Not saying its justified, just stating the risks.
In finance, the biggest desire is predictability, which is the one element lacking in student loans.
Lack of predictability is the worst thing for a lender

But,

Loan might be discharged via bankruptcy.

That removes a pretty big variable.

[Tiago Splitter]

More law schools received ABA accreditation due to a lawsuit against the ABA several years ago. The best solution is to once again make student loans dischargeable in bankruptcy. This will drive tuition costs lower & poorly performing law schools (re: employment) out of business. Blame credit card company lobbying for the current mess since they had the bankruptcy laws changed in 2005.

Law school tuition was rising pretty fast before those changes.

[iowalum]

The student does need to take responsibility. They aren't blameless, but when loans are given out as easily as they are it artificially skyrockets tuition for everyone else making it harder on everyone to afford to go. Not to mention the taxpayer picks up the burden when they default.

For sure. I hope this discourse changes iowalum's perspective. The availability of so many law schools, and so many loans, coupled with stupidity, affects society as a whole. We can't ever stop people from being stupid, but we can stop so many schools from being in the market, which would significantly cut down the amount loans. In effect, this would significantly cut down the amount of loans that result in a default.

I don't think you get that I'm agreeing with you (for the most part) - these schools are complete crap and should be shut down. But not putting at least some of the responsibility on the students is unrealistic. The only way they stay open is because people attend.

I think others are right here - the ABA needs to grow a pair and create some standards for the profession. Also, increased admin standards and debt that can be discharged. It's really a system-wide thing. But I still have no sympathy for someone who considers checking USNews enough research to justify borrowing $100k. I get the societal pressure to go to school, fake employment reporting, not being exposed to the right academic culture, etc. but 'not knowing better' is an excuse for a child, not a future lawyer. Spend 1 hour on the internet (or 5 minutes on TLS) and you'll figure out that this is one of the biggest decisions you will make and you need to invest wisely (i.e. - all law schools are not created equal). Much like the housing bubble analogy, the responsibility here is on several parties including the borrower.

It really does annoy me though that these schools are pushing up our tuition. Like I said before, shut 'em down.

[dingbat]

Risks:
payments might not be made in a timely manner
Payments may be for a (much) lower amount than ecpected
Principal+interest may be reduced to zero after 20(?) years, even if less than interest payments have been made for duration of the loan

Not saying its justified, just stating the risks.
In finance, the biggest desire is predictability, which is the one element lacking in student loans.
Lack of predictability is the worst thing for a lender

But,

Loan might be discharged via bankruptcy.

That removes a pretty big variable.

Yeah, but that doesn't help much if the rest of the income stream is unpredictable. (especially as they can still be discharged in the end)

if a manager knows that 85% of loans are paid on time as scheduled and 15% will most likely be discharged in bankruptcy, it's easy to deal with that.
Besides, when a loan is discharged in bankruptcy, you take the hit to your balance sheet and you're done with it.

Not knowing if a loan will get paid back, nor if it will be discharged, nor how much the payments will be when they do come is is pretty serious unpredictability.

As an easy example, you, as a lender, loan money to law school students.
You don't know how many will elect for 10 year repayment or for a longer period
you don't know how many will get jobs that can pay the full amount and how many will get IBR
you don't know what the payments under IBR will be.
So, basically, you have no way of estimating your cash flows

you ask any lender/banker if they'd rather provide 1000 loans with a 50% chance of discharge, but 50% paid as scheduled, or 1000 loans with no idea whatsoever if, when, and in what amount, repayments will occur, and I'll bet every last one will pick the former (assuming they could charge an appropriate interest rate in either scenario)

[sunynp]

I think that all the responsibility lies with the schools to tell the truth about employment statistics and indebtedness of their grads. If that information were truthful, then I think that students can be held accountable. It is not acceptable that professional schools commit fraud, whether they are ultimately convicted of that or not.

[flem]

Risks:
payments might not be made in a timely manner
Payments may be for a (much) lower amount than ecpected
Principal+interest may be reduced to zero after 20(?) years, even if less than interest payments have been made for duration of the loan

Not saying its justified, just stating the risks.
In finance, the biggest desire is predictability, which is the one element lacking in student loans.
Lack of predictability is the worst thing for a lender

But,

Loan might be discharged via bankruptcy.

That removes a pretty big variable.

Yeah, but that doesn't help much if the rest of the income stream is unpredictable. (especially as they can still be discharged in the end)

if a manager knows that 85% of loans are paid on time as scheduled and 15% will most likely be discharged in bankruptcy, it's easy to deal with that.
Besides, when a loan is discharged in bankruptcy, you take the hit to your balance sheet and you're done with it.

Not knowing if a loan will get paid back, nor if it will be discharged, nor how much the payments will be when they do come is is pretty serious unpredictability.

As an easy example, you, as a lender, loan money to law school students.
You don't know how many will elect for 10 year repayment or for a longer period
you don't know how many will get jobs that can pay the full amount and how many will get IBR
you don't know what the payments under IBR will be.
So, basically, you have no way of estimating your cash flows

you ask any lender/banker if they'd rather provide 1000 loans with a 50% chance of discharge, but 50% paid as scheduled, or 1000 loans with no idea whatsoever if, when, and in what amount, repayments will occur, and I'll bet every last one will pick the former (assuming they could charge an appropriate interest rate in either scenario)

You know how much you pay in interest payments and shit when on IBR, right?

[sunynp]

Risks:
payments might not be made in a timely manner
Payments may be for a (much) lower amount than ecpected
Principal+interest may be reduced to zero after 20(?) years, even if less than interest payments have been made for duration of the loan

Not saying its justified, just stating the risks.
In finance, the biggest desire is predictability, which is the one element lacking in student loans.
Lack of predictability is the worst thing for a lender

But,

Loan might be discharged via bankruptcy.

That removes a pretty big variable.

Yeah, but that doesn't help much if the rest of the income stream is unpredictable. (especially as they can still be discharged in the end)

if a manager knows that 85% of loans are paid on time as scheduled and 15% will most likely be discharged in bankruptcy, it's easy to deal with that.
Besides, when a loan is discharged in bankruptcy, you take the hit to your balance sheet and you're done with it.

Not knowing if a loan will get paid back, nor if it will be discharged, nor how much the payments will be when they do come is is pretty serious unpredictability.

As an easy example, you, as a lender, loan money to law school students.
You don't know how many will elect for 10 year repayment or for a longer period
you don't know how many will get jobs that can pay the full amount and how many will get IBR
you don't know what the payments under IBR will be.
So, basically, you have no way of estimating your cash flows

you ask any lender/banker if they'd rather provide 1000 loans with a 50% chance of discharge, but 50% paid as scheduled, or 1000 loans with no idea whatsoever if, when, and in what amount, repayments will occur, and I'll bet every last one will pick the former (assuming they could charge an appropriate interest rate in either scenario)

You also have to remember that the lenders don't have to comply with any consumer protections for collecting those loans. They can go after all assets and social security payments and can harrass borrowers. I think the repayment risk of these loans is more than covered by the artificially high interest and origination fees.

From what I've read - IBR isn't that easy to get and to stay on. The lenders process this and make it very difficult for the borrowers as well.

[dingbat]

You know how much you pay in interest payments and shit when on IBR, right?

your repayments are based on income (the I part of IBR)
The lender can't predict what your income will be.

Hence, the lender can't predict what your repayments will be.

Don't get me wrong, I agree that student loans are a complete rip-off, just trying to explain why the following quote is wrong and why it makes sense for lenders to charge a risk premium

There's virtually no risk to the lender, so how do they justify charging a risk premium?

My opinion is that the government guaranteeing student loans is a half-assed way of going about things.
Either subsidize schools, or don't.
Creating a framework for student loans (e.g. the old sallie mae) makes sense. guaranteeing the loans and fixing the interest rate does not.

[flem]

You know how much you pay in interest payments and shit when on IBR, right?

your repayments are based on income (the I part of IBR)
The lender can't predict what your income will be.

Hence, the lender can't predict what your repayments will be.

Don't get me wrong, I agree that student loans are a complete rip-off, just trying to explain why the following quote is wrong and why it makes sense for lenders to charge a risk premium

There's virtually no risk to the lender, so how do they justify charging a risk premium?

Except they can garnish your social security and shit like that. Additionally, even if you're only paying $5000/yr back over 20 years, you've paid back 100K. I'm pretty sure that's more than balanced out by all the people that pay a lot more than that at a ridiculously and artificially high interest rate. If it was such a "risk" the government wouldn't have been chomping (champing?) at the bit to get involved in the student loan biz. It's a cash cow for them.

[Tiago Splitter]

Except they can garnish your social security and shit like that.

They wouldn't garnish anything while you're under IBR. The only organization coming after your assets would be the IRS to collect the tax bill on your forgiven debt.

[sunynp]

Except they can garnish your social security and shit like that.

They wouldn't garnish anything while you're under IBR. The only organization coming after your assets would be the IRS to collect the tax bill on your forgiven debt.

I wonder how this would work if you are on social security due to disability. Do they take that money? I think you can get loans discharged if you can prove you will never work, but I am not sure about that.

I think that IBR is pretty new and we don't know exactly how it will work out. I just read that the 20 year repayment plan will only help people who borrowed after 2008 and also in 2012. I guess if you are in the in-between period you are stuck with the 25 year repayment period.

[dingbat]

Except they can garnish your social security and shit like that.

I'm not sure if this is true. Can you point me to that piece of information?

[Tiago Splitter]

Except they can garnish your social security and shit like that.

They wouldn't garnish anything while you're under IBR. The only organization coming after your assets would be the IRS to collect the tax bill on your forgiven debt.

I wonder how this would work if you are on social security due to disability. Do they take that money? I think you can get loans discharged if you can prove you will never work, but I am not sure about that.

I think that IBR is pretty new and we don't know exactly how it will work out. I just read that the 20 year repayment plan will only help people who borrowed after 2008 and also in 2012. I guess if you are in the in-between period you are stuck with the 25 year repayment period.

It looks like social security payments are included as income for IBR purposes, but IBR payments only start above 150% of the poverty level. I guess you'd be expected to pay your 15% beyond that. The main point is that IBR prevents things like garnishment from being an issue.

[flem]

Except they can garnish your social security and shit like that.

I'm not sure if this is true. Can you point me to that piece of information?

I may be parroting what an above poaster said. I know they can garnish wages.

[annet]

Except they can garnish your social security and shit like that.

I'm not sure if this is true. Can you point me to that piece of information?

I may be parroting what an above poaster said. I know they can garnish wages.

As far as I know federal student loans can result in some social security garnishment. They don't talk about it here https://www.myeddebt.com/borrower/horiz ... ion.action but it is listed here http://www.finaid.org/loans/default.phtml .

I don't think that default on private student loans can result in social security garnishment (or even wage garnishing) although I'm sure once you're in collections they'll try to convince you that they can.

[sunynp]

http://www.studentloanborrowerassistanc ... ion-tools/

The government has extraordinary power to collect student loans. The government can seize tax refunds, deny new student loans and grants, garnish wages without a court order, take a portion of Social Security benefits, and charge very large collection fees. Most crimes can only be prosecuted for limited periods of time, but there is no time limit for collection on federal student loans..

For an interesting read on student loan collection practices, you might be interested in this document calling for a complaint resolution mechanism with private loan collectors:

--LinkRemoved--

[Excellent117]

Bahaha, Social Security isn't going to be around when any of us are paying this stuff back anyway....

[timbs4339]

The student does need to take responsibility. They aren't blameless, but when loans are given out as easily as they are it artificially skyrockets tuition for everyone else making it harder on everyone to afford to go. Not to mention the taxpayer picks up the burden when they default.

For sure. I hope this discourse changes iowalum's perspective. The availability of so many law schools, and so many loans, coupled with stupidity, affects society as a whole. We can't ever stop people from being stupid, but we can stop so many schools from being in the market, which would significantly cut down the amount loans. In effect, this would significantly cut down the amount of loans that result in a default.

I don't think you get that I'm agreeing with you (for the most part) - these schools are complete crap and should be shut down. But not putting at least some of the responsibility on the students is unrealistic. The only way they stay open is because people attend.

I think others are right here - the ABA needs to grow a pair and create some standards for the profession. Also, increased admin standards and debt that can be discharged. It's really a system-wide thing. But I still have no sympathy for someone who considers checking USNews enough research to justify borrowing $100k. I get the societal pressure to go to school, fake employment reporting, not being exposed to the right academic culture, etc. but 'not knowing better' is an excuse for a child, not a future lawyer. Spend 1 hour on the internet (or 5 minutes on TLS) and you'll figure out that this is one of the biggest decisions you will make and you need to invest wisely (i.e. - all law schools are not created equal). Much like the housing bubble analogy, the responsibility here is on several parties including the borrower.

It really does annoy me though that these schools are pushing up our tuition. Like I said before, shut 'em down.

Right, but I'm not sure what "putting responsibility on the students," actually solves. The students can't go back and redo their decisions- once you are in you are in. Chastising them doesn't help and probably makes things worse. Focusing energy on shouting PERSONAL RESPONSIBILITY over and over at the people with the least bargaining power and ability to process information is a red herring. There's a large body of social science and psychological literature out there that suggests that people are especially prone to the cognitive biases that we see a lot in the people who come on this board asking for advice. Two I can think of that I see here all the time are confirmation and optimism bias (also known as "special snowflake syndrome."

I guess I'm just tired of the prevailing mentality in this country which always blames the weakest party to the transaction. Any solutions then fall hardest on these people. We should be trying to shut down some schools and cap tuition at other schools no matter how many tenured profs and deans get hurt.

[RedBirds2011]

The student does need to take responsibility. They aren't blameless, but when loans are given out as easily as they are it artificially skyrockets tuition for everyone else making it harder on everyone to afford to go. Not to mention the taxpayer picks up the burden when they default.

For sure. I hope this discourse changes iowalum's perspective. The availability of so many law schools, and so many loans, coupled with stupidity, affects society as a whole. We can't ever stop people from being stupid, but we can stop so many schools from being in the market, which would significantly cut down the amount loans. In effect, this would significantly cut down the amount of loans that result in a default.

I don't think you get that I'm agreeing with you (for the most part) - these schools are complete crap and should be shut down. But not putting at least some of the responsibility on the students is unrealistic. The only way they stay open is because people attend.

I think others are right here - the ABA needs to grow a pair and create some standards for the profession. Also, increased admin standards and debt that can be discharged. It's really a system-wide thing. But I still have no sympathy for someone who considers checking USNews enough research to justify borrowing $100k. I get the societal pressure to go to school, fake employment reporting, not being exposed to the right academic culture, etc. but 'not knowing better' is an excuse for a child, not a future lawyer. Spend 1 hour on the internet (or 5 minutes on TLS) and you'll figure out that this is one of the biggest decisions you will make and you need to invest wisely (i.e. - all law schools are not created equal). Much like the housing bubble analogy, the responsibility here is on several parties including the borrower.

It really does annoy me though that these schools are pushing up our tuition. Like I said before, shut 'em down.

Right, but I'm not sure what "putting responsibility on the students," actually solves. The students can't go back and redo their decisions- once you are in you are in. Chastising them doesn't help and probably makes things worse. Focusing energy on shouting PERSONAL RESPONSIBILITY over and over at the people with the least bargaining power and ability to process information is a red herring. There's a large body of social science and psychological literature out there that suggests that people are especially prone to the cognitive biases that we see a lot in the people who come on this board asking for advice. Two I can think of that I see here all the time are confirmation and optimism bias (also known as "special snowflake syndrome."

I guess I'm just tired of the prevailing mentality in this country which always blames the weakest party to the transaction. Any solutions then fall hardest on these people. We should be trying to shut down some schools and cap tuition at other schools no matter how many tenured profs and deans get hurt.

My go this is so true. It is very often the weaker party that is blamed. So depressing to think of.