New Jersey's Student Loan Program is 'State-Sanctioned Loan-Sharking'

New Jersey’s Student Loan Program is ‘State-Sanctioned Loan-Sharking’

https://www.propublica.org/article/new-jerseys-student-loan-program-is-state-sanctioned-loan-sharking?google_editors_picks=true

This was covered in the NYT's today.  Very sad story.

http://www.nytimes.com/2016/07/04/nyregion/in-new-jersey-student-loan-program-even-death-may-not-bring-a-reprieve.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region®ion=top-news&WT.nav=top-news&_r=0

New Jersey seems to be worse than other states, thanks to a Chris Christie appointee.

Student debt is a huge problem, and I don't see much help on the horizon.  That's one of the reasons I voted for Bernie.  College used to be so affordable and the government gave out grants for the needy.  That's how I was able to go for undergraduate.  

It is also in the NY Times. Hideous. 

We used to have an NJCLASS loan as one of my husband's law school loans. The interest rate was insane- 8.5%. We have since refinanced with another company. 

Although honestly, our federal loans have a rate set by Congress, and it's still 6.5%. Nearly twice as high as our mortgage. 

Vote for establishment candidates, get establishment policies.  

No one holds a gun to anyones head to force you them to borrow money. 

No, they just withhold higher education from you.

Nothing is withheld.  Higher education is mostly provided by private organizations charging too high fees to feed its huge bureaucracy staff.  If people did not buy at inflated prices less expensive options would emerge. 

It is a nice theory, and in the aggregate it might work,but it is based on two assumption that do not hold with reality.  The first is that an individual rational actor would abstain from higher education for a long-term purpose that does not directly advantage said actor.  The second is that education is effectively provided by an open and free market, a proposition that has never succeeded anywhere.

Because it has never been tried and the entrenched interests do everything to make sure it is not tried. 

NJ's loan program is about earning money off of people seeking to gain a higher education. Other states provide the same loans at much lower interest rates and are willing to modify loans in exceptional circumstances. Yes, no one is forced to take these loans, but the real issue here is why is the NJ program is more like usury than the normative state-based student loan program???

in-state students should be able to attend Rutgers for low tuition, even if they are middle class.  The privates can do what the privates are going to do. But a kid's local public should be attainable.

dave said:

Vote for establishment candidates, get establishment policies.  

Define "establishment".

When the state ran it, it was corrupt.

Now private interests are involved. It sounds to me like they're securitizing the loans and selling them. That is what allows more loans. The state wrote the indentures (it sounds like) to make it hard to discharge the debt. If they weren't written that way, people buying the loans would demand a higher rate of interest for the possibility of principle reduction.

You're talking about making loans to people with no jobs and few assets. Using a co-signer gives them a better chance of getting a loan at a better rate- but it has to have teeth or it's worthless. Co-signing doesn't mean "I vouch for this kid". It means you'll stand in if they don't pay, for whatever reason. No consigner, higher rates.

The point of the NY Times article was that the NJ program deals far more harshly with defaulting debtors than do the programs of other States.

Aggressive collection efforts do not preclude accommodations for legitimate hardship cases.

Moral hazard is never good with debt.  You take it, you pay it.  

bramzzoinks said:

Because it has never been tried and the entrenched interests do everything to make sure it is not tried. 

Not at all true.  Until the middle of the 19th century, all education was fee for service.  It was in response to the  massive failure of this system that public education and public universities were established.

No I was talking about innovative no frills education.  Nothing but classes.  No expensive addons. 

Like community college?

Even they have too many extraneous things that bloat their staffs.

bramzzoinks said:

Moral hazard is never good with debt.  You take it, you pay it.  

Except the government has forgiven enormous amounts of debt to foreign countries and bailed out major corporations.  

And part of the problem was the lack of full disclosure.  Had students realized that they could get shop their loans rather than just go with what the finance person at the university/college suggested.  My guess is the schools got referral fees (ok, kickbacks) for working with certain lenders.  

I have tried to refinance my kid's student loans and quite frankly the system is broken.  

I don't know about NJ, but state universities in PA push the student loans on you hard. To the extent that when the semester's bill arrives, it already has the loan amount deducted.

The notion of a tuition-free K-12 public education is outdated. This isn't the 1930s anymore, and to be successful in the twenty-first century you need more than that. 

State, county and community colleges should be tuition-free for residents. 

You may want to reword that.  It sounds like you think k-12 should be fee based, which I do not think is what you meant to say

What I meant was that tuition-free K-12 was too limited, and should be expanded to tuition-free K-12 plus 4. No fees for either.

I was struggling with avoiding the word "free" alone, which would send our libertarian friends over the edge. 

I could possibly agree to that if the no cost to student institutions that provided the college classes only provided classes and nothing else in terms of services or activities, with faculty paid only to teach and do nothing else. 

Well like high school, it's not much of an education without activities. 

By services I assume you mean things like housing and meals, which would be -- so to speak -- a la carte. Other services like counseling are essential to the successful completion of a degree program. And others still -- off the top of my head I come up with campus parking, transcripts, judicial and disciplinary, network access -- can't be disentangled from what's there for out-of-district students. 

College is not high school. If education is to be provided no cost to students it is all about getting a job and nothing else.

I'm not sure anyone is talking about no-cost. But I don't think it's unreasonable to suggest that we as a country should prioritize affordable college, and that includes keeping interest rates under control. If I can buy a house for 3.5% interest, I should be able to go to college/grad school for that too.

Our biggest frustration is with law school loans, by the way... law school's kind of a racket in and of itself in a lot of ways, but that's a different story!!

bramzzoinks said:

College is not high school. If education is to be provided no cost to students it is all about getting a job and nothing else.

That's mostly non-responsive, but let me remind you that networking is the most effective way of getting a job. But that's only if I accept your argument that getting a job is the only purpose of an education, which of course I don't.