Financial collapse and student loan debt burdens. How will they pay the loans back?

[Sharky]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

I was wondering about student loans from a different perspective. I am a big debtor...I'm about 70k in debt from my MBA. My loan is variable and I believe tied to 91-day T-bill rate. Given the itulip hypothesis of extremely high inflation won't this actually benefit me since even in the high inflation environment, the T-bill rate will stay relatively low? Should I be trying to consolidate to a fixed rate given the 8 years I have left on it?

Inflation might turn high in the long-run, but in the mean time, what if:

-- you lose your job
-- your wages decline (with short-term deflation)
-- the government forcibly re-writes the terms of your loan to be less favorable
-- the government increases penalties for late payments

What other assets might you be forced to sell to make payments on your student loans?

Consolidating to fixed rate is a good idea. Paying them off sooner rather than later is even better. Getting the government and bankers out of your life is a good thing.

[Wild Style]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

Evidently you can't think of one either...

You didn't seem to get my point. My point was, do some research ;) I don't mean the five minute google type either. Lets take America for example, they had a violent revolution. After which time they had economic hardships, civil war and social unrest because of social inequalities etc. To think a revolution culminates in instantaneous shangri la is to display a very shallow depth of knowledge when it comes to history, no? Not only that, how long did it take America to go from its revolution to a time of prosperity and peace for ALL of its citizenry? Did that take 30, 40, 50 yrs? Hmmm? India has huge potential, still has a long way to go but they also had violent uprisings to finally through off the British. That is how these things work, it is what it is. My family is from W. Africa, and we have seen our share of night mares. But I also know that much of Africa's problems is outside meddling and puppet govts. I eluded to this in my first post to you. I don't much like going into these things because everyone on the net these days seems to have opinions about things they have little first hand knowledge of. Not to say you are one of these types. I have enjoyed many of your posts here. I just tend to try and shy away from these sorts of conversations because they generally become circular.

Either wayI am in no way advocating a violate uprising in America, that would be horrible. I am saying, what Mrs. Fitts said (if you listened to the interview) during her interview as far as what would and wouldn't happen in the United States if things go ape shit economically is a bit naive. Heck even EJ has acknowledged in many of his writings how ugly this thing/could/would get given things go along the path he foresees.

P.S.

Please don't take offense to anything I have said above. I don't mean to insult or offend.

[Sharky]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

you have to admit that rarely do the benefits outweigh the costs... for the revolutionaries, that is.

My take on it is that big change of any kind -- violent or peaceful -- is rarely good for anyone involved, in the near term.

The best environment is one that peaceful and consistent (and therefore predictable) over a long period of time.

It's also the case that sometimes change is necessary, even though it's unpleasant for all involved. Whether it will be violent or peaceful is impossible to predict, particularly when you're sitting in the middle of it.

If you look back at history, the most violence seems to happen when people are given a taste of something good, and then have it taken away from them. People who have always known nothing but poverty are less likely to revolt than people who were once reasonably well-off and are suddenly poor. The Chinese communist government may very well have slit their own throats in that way.

For that reason, I don't expect things to be pleasant in the US. The only thing the government is doing is more inflation, regulation and taxation: the raping of the producing for the sake of the failing -- all of which are the destroyers of people and of entire nations. If the public doesn't wake up in time, the alternative is more socialism and totalitarianism. Free and poor (but with the potential for a happy future), or enslaved and poor (with no hope of future happiness). Take your pick.

[GRG55]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

...Either wayI am in no way advocating a violate uprising in America, that would be horrible...

On this we are in complete agreement.

My view is no constructive change ever takes place before there is dissatisfaction with the status quo. Maybe we are finally getting close to that point with the political system, among the citizens of the USA. Maybe not? I am having difficulty gauging it to be truthful, partly because even the level of outrage on this site to some of the nonsense going on remains rather subdued.

Regardless, a wholesale violent revolutionary overthrow of all the public institutions is counterproductive. Reform or replacement of those that are too far corrupted is urgently needed. Support and building on those institutions that have not fallen into this cesspool [let's hope the judiciary is one of those] is equally essential. The citizens of the USA urgently need to take back their Republic. From Fitts' writings several years ago I think she believes the same.

For those that asked why did I restrict it to a "modern" example? Simple. This crisis is in the here and now, not the 18th century. As much as some of Wall Street's and Washington's finest are richly deserving of a modern day equivalent of The Terror [metalman as Robespierre?? ] modelling a solution to today's circumstances after the French Revolution or the American War of Independence didn't strike me as particularly instructive or illuminating.

[Wild Style]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

On this we are in complete agreement.

My view is no constructive change ever takes place before there is dissatisfaction with the status quo. Maybe we are finally getting close to that point with the political system, among the citizens of the USA. Maybe not? I am having difficulty gauging it to be truthful, partly because even the level of outrage on this site to some of the nonsense going on remains rather subdued.

Regardless, a wholesale violent revolutionary overthrow of all the public institutions is counterproductive. Reform or replacement of those that are too far corrupted is urgently needed. Support and building on those institutions that have not fallen into this cesspool [let's hope the judiciary is one of those] is equally essential. The citizens of the USA urgently need to take back their Republic. From Fitts' writings several years ago I think she believes the same.

For those that asked why did I restrict it to a "modern" example? Simple. This crisis is in the here and now, not the 18th century. As much as some of Wall Street's and Washington's finest are richly deserving of a modern day equivalent of The Terror [metalman as Robespierre?? ] modelling a solution to today's circumstances after the French Revolution or the American War of Independence didn't strike me as particularly instructive or illuminating.

Think about this as I said before. It takes years and years and years and years for a country to develop. you restricting revolution to the hear and now is not reasonable given the fact it takes so long to bring a country into a orderly system of governance. There is a steep learning curve and takes generations (again just look at America). That was my point in bringing up the American Revolution (didnt bring up the french revolution, I bought up the colonies which over through the french). I didn't bring up the American revoluition to say (hey thats what we should do) but instead to show (hey the process takes a LONG time). This is also why I said research is needed. Thinking that revolutions are not succesfully because after 50 years or so these countries don't look like America defies logic. America 50 years after its revolotion wasn't a complete success. As I said before, they also saw civil war, civil unrest, depressions etc. But one thing I do know. Those in power don't relinquish it peacefully, that just doesnt happen, ever. People would need to rise up and do someting about it. The problem in America is the lack of a cohesive consciousness if you get what I mean. So many different religions, ideologies, ethnicities. There would need to be a united and agreed upon front/platform to steer such a change and we just don't have it. If there were a revolution here their would be blood as soon as the present system was over thrown (read: the people would eventually turn on each other). Because who would govern and what system would prevail? Even once we get through this depression we are headed into, I still think the same people will be at the top and little is going to truly change. They may be forced to institute some symbilance of a just society to calm the masses but at the end of the day, the same people will be at the top, atleast thats how I see it. I could be wrong though, something truly incredible could happen.

Either way, this strays away from what I first brought up which was the interview with Mrs Fitts. The main thrust of her argument against civil unrest was that, because of non leathal weapons that the U.S. govt has, people wouldn't become unrully should things continue downward. I think she under estimates the reactions of the hungry, hopeless and disenfranchised (should it get to that point).

[LargoWinch]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

I was wondering about student loans from a different perspective. I am a big debtor...I'm about 70k in debt from my MBA. My loan is variable and I believe tied to 91-day T-bill rate. Given the itulip hypothesis of extremely high inflation won't this actually benefit me since even in the high inflation environment, the T-bill rate will stay relatively low? Should I be trying to consolidate to a fixed rate given the 8 years I have left on it?

SupermanTattoo; welcome to iTulip.

I think metalman is right, your focus should be on principal repayment asap. But that is obvious.

For me to try to sort this out, we need to know a lot more about your situation:

Is your loan really tied to T-Bill? (you said you "believe so")
What are the rates you can lock your loan into? For how long?
Are there any fees in doing so?
Are you repaying your loan now?
Do you have other debts such as credit cards?
Do you have children or other obligations?
Are you employed currently?
Is there a penalty for early repayment of this loan?
Do you have any investments outside of your 401(k)?

Having said that, assuming you have a job and a good cash flow net of expenses, I would be enclined to lock-in my rate due to the low interest rates environment and simply to remove the interest rate risks from this liability.

During a period of high inflation, you have to assume that your salary increases will lag the inflation rate and will also lag any potential increases in the T-Bill rate; hence increasing the real burden of your loan overtime.

[due_indigence]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

The Greek kids got some b*lls. This allows them to pick up bricks. Americans for all their gun-rhetoric have the bullets but no bottle. America has perfected sheepledom. You almost can't blame the elites for their air of superiority and contempt. It's like stealing candy from special children. After awhile it becomes an irresistible habit. Now the Fed's writing trillion dollar blank checks to parties unknown. Has a nation ever marched down the standard of living ramp with greater docility?

Remember credit (another name for money which is another name for debt) chased average Americans. Aggressively. The mail box was stuffed with credit opportunities. Americans obliged. Heck their wages had been stagnant for years. Why not? Marx and Engels didn't predict liar loans would step in to bridge the overproduction gap. But then, they sort of did.

It's still hard to feel completely sorry for the American worker. As for the American student, hey if you aren't passionately outraged about life's
injustices when you're 19, how animated will you be at 40?

Nature doesn't reward passive sheep. Where's Huey Long? Class war beckons but the demagogues are MIA. Or are Americans too beleaguered even to get angry? Or is this one big long damn fuse? What has to be taken away from Americans for them to erupt? Prozac? Blockbuster Video? American Idol? Potable water? The mind boggles.

[Jim Nickerson]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

The Greek kids got some b*lls. This allows them to pick up bricks. Americans for all their gun-rhetoric have the bullets but no bottle. America has perfected sheepledom. You almost can't blame the elites for their air of superiority and contempt. It's like stealing candy from special children. After awhile it becomes an irresistible habit. Now the Fed's writing trillion dollar blank checks to parties unknown. Has a nation ever marched down the standard of living ramp with greater docility?

Remember credit (another name for money which is another name for debt) chased average Americans. Aggressively. The mail box was stuffed with credit opportunities. Americans obliged. Heck their wages had been stagnant for years. Why not? Marx and Engels didn't predict liar loans would step in to bridge the overproduction gap. But then, they sort of did.

It's still hard to feel completely sorry for the American worker. As for the American student, hey if you aren't passionately outraged about life's
injustices when you're 19, how animated will you be at 40?

Nature doesn't reward passive sheep. Where's Huey Long? Class war beckons but the demagogues are MIA. Or are Americans too beleaguered even to get angry? Or is this one big long damn fuse? What has to be taken away from Americans for them to erupt? Prozac? Blockbuster Video? American Idol? Potable water? The mind boggles.

Just how bad are things in the US compared to the rest of the world? My superficial assessment is not very bad.

It has amazed me and continues to do so that those in Zimbabwe have not rioted and have not assassinated Mugabe. Now if those people don't have terrible enough lives to take up arms, it seems to me that the US would need several generations more to become seriously downtrodden before possibly being provoked enough to force a change in the political management of the US. Or just take the blacks in this country that have rioted, has the country as a whole even come to close the the level of provocation that were producing our racial riots?

[BadJuju]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

Where's Huey Long?

I would take credit over Huey Long. Give me someone like Eugene Debs.

[Wild Style]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

It has amazed me and continues to do so that those in Zimbabwe have not rioted and have not assassinated Mugabe.

link

link

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American media = the worst. As for assassinating Mugabe, I have to imagine that isn't to far off. I doubt there hasn't been attempts.

[dcarrigg]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

Speaking as somebody who has a Master's degree, I believe college education is mostly useless unless one intends to become a lawyer or a doctor or enter into a specialised area like engineering. The vast majority of people DO NOT require college degrees for the work they do. It is a wasteful societal fad that piles on debt on the unwary, wastes enormous time and resources teaching things to people that they never use in their career.

The proliferation of university education is another example of the wastefulness that characterises contemporary America and Britain. In the 1980s, a statistic encapsulated the situation: America has 15 times as many lawyers per thousand as Japan, Japan has 15 times as many engineers per thousand as America.

I respectfully disagree here. Education that does not link one to a "specialized area" such as the MD, JD, engineering, etc. has to be viewed as an end in and of itself.

If one is measuring worth by assuming that the credential (BA, MA, PhD, etc.) will translate directly into a job or purchasing power, then you are correct, it is mostly worthless.

If one uses education to inform what they do at work and work to inform what they learn in education then there is value. Not only the value of learning for its own sake, but the value of having a broader and deeper understanding of the world, concepts, and systems in/upon which one operates. This may or may not translate into purchasing power, depending on how one chooses to use this understanding.

Put another way, don't expect to go out and score a six-figure job with your MA in sociology. Do use the understanding and contacts gained through the educational pursuit to your advantage throughout whichever career you may choose. The results may be astounding.

15 times the engineers does not translate to happiness or GDP growth (nor does 15 times the lawyers). 15 times the population with the ability to soundly analyze and conceptualize their life, systems, business, and country just might.

[skidder]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

"My view is no constructive change ever takes place before there is dissatisfaction with the status quo. Maybe we are finally getting close to that point with the political system, among the citizens of the USA. Maybe not? I am having difficulty gauging it to be truthful, partly because even the level of outrage on this site to some of the nonsense going on remains rather subdued."

Well, I use this site to inform myself about economic matters and occasionally throw in my .02 when I feel it is worthwhile to the other readers, which isn't often given the level of discourse here.
I can't remember ever expressing outrage at the current events here although some may have slipped out, just not relevant or informative imo.

That being said, I did just send the remaining senator from my state a letter expressing my extreme displeasure with the conduct of the senate and congress in general. The other senator didn't make the cut on this last election. I made it my special mission to cast a vote against him because of his vote for the TARP program. It is short term thinking on my part but I felt strongly about that vote mainly because it was such a fraud. I know that the new senator will not be to my liking either, too liberal.
Regardless, the content of my letter can be summarized as follows.
1). Allow the executive branch to make their own laws and the house & Senate become irrelevant. As far as I can tell this is the situation today.
2). Failure to execise proper oversight vis-a-vie constitutionally mandated checks & balances is malfeasance. Please do something that would indicate you give a rip about what is being done to our country.
3). The investment banks, et al., are not only acting irresponsibly but are mostly engaged in a fraud against the American citizen.
4). The seeds of revolution are being sown because congress is allowing the executives of bailed out institutions to collect massive bonuses instead of being jailed and charged with fraud/malfeasance. Corruption abounds and only little fish are being held accountable on the rare occasion it happens at all. The whole corporate/congressional lobbying circle jerk is nothing but a system to ensure preferential treatment by the big corporations and a farm system to employ recently displaced congressmen.
5). Fractional reserve banking is largely responsible for the problems this country faces and the Federal Reserve act needs to be voided and a sound monetary system installed.

It wasn't a comprehensive letter by any means but I am hoping that tons of these letters start showing up so these idiots finally start realizing that their personal safety is eventually going to be threatened should they continue doing the bidding of central bankers and their henchmen at the expense of J6P.

[SupermanTattoo]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

Metalman: Fully agree with your implication that an MBA outside the top 15 or so schools doesn't make good sense....luckily UCLA makes the grade.

The loan is indeed tied to 3mo T-bill and is currently 4.75%. I can get a fixed rate of 6.8% for the life of the loan. There will be some fees associated with this but if I recall from the last time I consolidated, the fees are reasonable. There is no prepayment penalty.

As for me...no credit card expenses, car payments, mortgage, wife, kids or any other obligation except for rent, student loans, and occasionally paying for dates.

I had been repaying the loan for the past 2+ years since graduating but have begun to think about other options given that I ......(wait for it....wait for it)... just lost my job. The layoff was really an idiosyncratic issue with the company more so than a direct result of the economy. Call me optimistic but my job prospects aren't too bad given my field of expertise (Entertainment Finance and Strategy).

I have savings of about 10k and about 20k in non-IRA investments. I'm inclined to hold as much of this as possibly due to a) my belief that my investments can beat my sub-5% cost of capital and b) I'd like a little security given the I Am Legend / Children of Men scenarios being floated around these boards.

My current considerations are:
1) Do I try to refinance with a fixed rate given the high inflation environment we are expecting? and
2) Do I extend the life of the loan from 10 to 25 years with the thought that paying off with future near worthless bonars is more favorable? This has the added benefit of lowering my current payments... appealing given my current unemployment and that half my loans are ineligible for deferment.

This really comes down to whether we believe the Tbill rate to which my loan is tied will increase sufficiently in the coming years to make the cost of carrying the debt greater than that the opportunity cost of the money I could be paying it down with. Or put another way, will the Tbill rate rise with inflation?

Thoughts are greatly appreciated......

[hayekvindicated]

Re: Financial collapse and student loan debt burdens. How will they pay the loans back?

I respectfully disagree here. Education that does not link one to a "specialized area" such as the MD, JD, engineering, etc. has to be viewed as an end in and of itself.

If one is measuring worth by assuming that the credential (BA, MA, PhD, etc.) will translate directly into a job or purchasing power, then you are correct, it is mostly worthless.

If one uses education to inform what they do at work and work to inform what they learn in education then there is value. Not only the value of learning for its own sake, but the value of having a broader and deeper understanding of the world, concepts, and systems in/upon which one operates. This may or may not translate into purchasing power, depending on how one chooses to use this understanding.

Put another way, don't expect to go out and score a six-figure job with your MA in sociology. Do use the understanding and contacts gained through the educational pursuit to your advantage throughout whichever career you may choose. The results may be astounding.

15 times the engineers does not translate to happiness or GDP growth (nor does 15 times the lawyers). 15 times the population with the ability to soundly analyze and conceptualize their life, systems, business, and country just might.

The contemporary American (or Western) university is about as open minded as the Kremlin back in the 1940s. All education is about as politicised as it can get. Now, there will be those who will vociferously deny the very existence of such a thing. But I have enough frineds in academia to be convinced of this.

Being subject to three years of non-stop propoganda does not constitute "education".