origin of US student loans, present huge debts

http://www.economist.com/node/21534792

Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%. By some estimates delinquency rates, an earlier indicator of stress, for student loans exceed 10%, ten times that for credit cards and car loans. Ms Loonin’s average client has a low-paying job, $30,000 of debt and is in arrears.

This is despite punitive laws to enforce repayment. In response to clever students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. In 1991 the statute of limitations for non-repayment was eliminated.

Many troubled borrowers could avoid default if they used government options to consolidate their loans and make minimum payments, says Ms Loonin, but they are unaware of the possibility. Their primary contact with the industry after being granted a loan is through collection agents who are compensated based on how much they collect, and who therefore have little incentive to explain alternatives.

There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. For now the bail-out is the bigger priority for politicians. For many years government-backed loans were distributed through banks which earned a fee and occasionally had to assume a little bit of risk, but in 2009 the business was entirely absorbed by the federal government.

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D - similar to the Canadian situation in that respect. The Boomers used generous bankruptcy laws to belly-up on their student loans. (You could not even list it on their credit report!) Once finished their education, they then sealed the loophole - and increasingly clamped down through the mid to late '90s.

Nice.

http://www.hrsdc.gc.ca/eng/learning/canada_student_loan/Publications/annual_report/2009-2010/tables/default_institution.shtml

Default by institution type. Oddly. college grads do so more than universities, though less than private institutions.

lj.ca/archive/articles/37_12_schwartz.pdf

http://www.hrsdc.gc.ca/eng/hip/cslp/statistics/08_st_DefaultRatesCanadaProvinces.shtml

D - the default rate was lower '97 to 2000. Why? That is exactly when they introduced the 2 -then 10- year rules for defaulting. This is exactly the gill net that scooped up this fish.

These days, students default cuz they're broke, not cuz they want to.

http://www.hrsdc.gc.ca/eng/learning/canada_student_loan/Publications/annual_report/2009-2010/glossary.shtml

Looks like my knowledge of student loans has become a bit dated.

verbal sparring between gen X and Y writers

http://www.theglobeandmail.com/life/the-hot-button/generational-warfare-what-comes-between-gen-x-and-gen-y/article2217023/

Then, Gen X Gixmodo writer Mat Honan, who is 39, issued a smack-down on his blog aimed at those pesky kids.

“But Generation X is tired of your sense of entitlement. Generation X also graduated during a recession. It had even shittier jobs, and actually had to pay for its own music." Gen X, he goes on to say, is used to getting the short end of the stick.

“This urge to define generations is also about a yearning for a collective memory in an increasingly atomized world, at least where my generation is concerned.

“Indeed, where the Millennials tend to define themselves in terms of the way they live now, people in my cohort find fellowship more in what happened in the past, clinging to cultural totems as though our shared experiences will somehow lead us to better figure out who we are.”

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D - other than Boomers being born after WWII, there are no real and clear cutoff lines between generations. Even late Boomers share some problems with early Xers.

And the X and Y distinction is pretty much arbitrary.

I'm trying to think of any clear cutoff lines.

There is the Double Cohort graduation in high school in Ontario. A few fast-tracked graduation to beat the crowd.

http://www.cbc.ca/news/canada/story/2003/08/31/doublecohort030831.html

So those who were 18 in 2003? Um, born 1985 and later? I thought that was the wrong direction to go. If all those new jobs require more than high school, then doesn't that make a 2-year college program the 'new high school'? Now less and not more covered. A 4 year U degree only does what a 3 year did before due to the loss of 1 year. Essentially, post-secondary education amounts to paying directly for what used to be publicly funded. How about going the other way to reflect trends, and fully publicly fund the 1st 2 years of post-secondary education? Matched to small-biz seed funds and apprenticeships/ job placement incentives, the young adults would hit the ground running in work. The typical small business can be started with an additional 10-15,000 bux - this is comparable to a couple years of education funding.

university south of the border

http://money.cnn.com/2011/10/26/pf/college/college_tuition_cost/index.htm?source=cnn_bin

Stop the tuition madness

Unfortunately, since family incomes have been falling for the last three years, even these lower net prices are taking up a higher percentage of most families' incomes, says Sandy Baum, an economist who is the lead author of the College Board's report.

Low- and middle-income families are getting squeezed because many colleges and states have shifted financial aid dollars into "merit" programs to attract top students more likely to come from higher income families.

While community college tuition posted a sharp 8.7% gain, it's still a bargain: only about $3,000 a year for full-time tuition.

The sticker price of studying and living on campus at the average public university rose 5.4% for in-state students, or about $1,100, to $21,447 this fall, the College Board estimated.

Many campuses, however, had increases that were drastically higher. California State University San Marcos posted the highest percentage increase in the country by raising tuition and fees by 31% to $6,596, according toCollegedata.com.

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D: USA can afford a huge prison system and a giant military machine.

But not affordable decent post-secondary institutions.

Choose your poison.

Here in Canada, on the left we have a c. 2 BILLION dollar gun registry boondoggle.

On the right, the new Harper gov't is revoking that registry- then introducing equally useless and expensive tough-on-crime legislation.

We are choosing poison too.

ways to reduce canada student loan

Repayment assistance

CSLP offers a number of programs to assist students who find themselves facing financial difficulty during repayment. Among these programs are:

Interest Relief^[12]

Interest Relief is designed to help students meet repayment obligations if they are temporarily unable to make payments on their government student loans because of unemployment or low income. Interest Relief is granted for periods of six months, up to a maximum of 30 months. Some exceptions, such as Canadian residency, may apply. Students may also be eligible for a further 24 months of Extended Interest Relief. Once approved for Interest Relief, students are not required to make payments on either the monthly interest or the outstanding principal of their loan(s) (the federal and/or provincial government will pay the interest on a student's behalf).

Debt Reduction in Repayment^[13]

Debt Reduction in Repayment is designed to help students facing long-term financial difficulties manage the repayment of their Student Loan(s). DRR lowers the principal amount of a loan, thereby reducing the monthly loan payment to an affordable level based on family income. A student can receive up to three reductions (totalling up to $26,000) on their Canada Student Loan principal during their lifetime, depending on financial circumstances.

Revision of Terms^[14]

Revision of Terms is a feature that provides students with the flexibility to manage loan repayment in a way that is responsive to individual situations. It can be used to decrease the monthly payments by increasing the repayment period (from the standard 10 years up to 15 years) should a student find the standard terms difficult to maintain. It can also be used to increase loan payments by reducing the repayment period, allowing more rapid repayment of a loan.

Permanent Disability Benefit^[15]

Permanent Disability Benefit allows for the reduction of loans for students who are experiencing exceptional financial hardship due to a permanent disability. The eligibility criteria varies based on date of loan negotiation and lender. A recent Access to Information request indicated that over 60% of applicants to this program were denied loan forgiveness.

• These programs are currently under revision and will gradually be replaced by the Repayment Assistance Program beginning in August 2009.

• To qualify for these programs one must be a resident of Canada. Graduate students who are studying abroad and have exceeded their maximum allowable weeks of study do not qualify for any assistance in repaying their loans. Neither do other Canadians who no longer reside in Canada.

a survey about Gen X

http://www.sciencedaily.com/releases/2011/10/111025091638.htm

Among the many findings:

• Compared to a national sample of all adults, Gen Xers are more likely to be employed and are working and commuting significantly more hours a week than the typical U.S. adult, with 70 percent spending 40 or more hours working and commuting each week.
• Two-thirds of Generation X adults are married and 71 percent have minor children at home.
• Three-quarters of the parents of elementary school children say they help their children with homework, with 43 percent providing five or more hours of homework help each week.
• Thirty percent of Generation X adults are active members of professional, business or union organizations, and one in three is an active member of a church or religious organization.
• Ninety-five percent talk on the phone at least once a week to friends or family, and 29 percent say they do so at least once a day.

"In sociologist Robert Putnam's influential book, 'Bowling Alone,' he argued that Americans were increasingly isolated socially," Miller said. "But this data indicates that Generation X members are not bowling alone.

...

Finally, Miller reports, Generation X adults are happy with their lives, with an average level of 7.5 on a 10-point scale in which 10 equals "very happy."

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http://en.wikipedia.org/wiki/Generation_Y

Gen Y: The majority of Generation Y is likely more tuned to culturally liberal^[49] with many supporting modern yet historically more liberal views in general as well as various other politically liberal stances,

...

Since the 2000 U.S. Census which allowed persons to select more than one racial group, "Millennials" in abundance have asserted their right to have all their heritages respected, counted and acknowledged.

...

Here is a verbatim reprint of the actual Advertising Age op ed. of August 30, 1993 -- the above erroneous information notwithstanding:

"That cynical, purple-haired blob watching TV, otherwise known as Generation X, has been giving marketers fits for a long time. He doesn't respond to advertising, isn't brand-loyal and probably doesn't have much discretionary income, i.e. a job. But help is on the way. Following this angry young adult generation is a group of teens-agers who are leaving Generation X at the gate. There are 27 million of these 13-to-19-year-olds spending $ 95 billion a year, and both numbers will rise in the next 10 years. As our headline last week pointed out, this group is interested in real life, real solutions.

"Teens care -- about AIDS, race relations, child abuse and abortion. But instead of saying, I got screwed, they say, What am I going to do about it? They like to volunteer and they respond to marketers who they can believe are helping make the world better. There are other differences with Generation X. Male teens read and don't spend all their time in front of the TV. A Roper survey showed that 83% of male teens read a major magazine at least once every four weeks, and 43% subscribe to a magazine. Comic books and place-based media are good ways to reach teens. If they're over 16, they listen to radio.

"OK, they like to shop for price and dump a brand if it gets costly. In personal care products especially, teens look for bargains. But Jane Grossman, Seventeen publisher, says they love brands and trust advertising more than any other group.

...

Economic prospects for the Millennials have worsened due to the late-2000s recession.^[52][53] Several governments have instituted major youth employment schemes out of fear of social unrest due to the dramatically increased rates of youth unemployment.

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D - nice point. Lots of disengaged, frustrated young men who are not married with jobs can mean crimes, riots- and revolutions. Food for thought.

another name for gen Z - gen "squeeze"

http://www.theglobeandmail.com/news/national/after-the-boomers-its-generation-squeeze/article2205685/


Prof. Kershaw, an associate professor at the Human Early Learning Partnership, released a study on Tuesday with colleague Lynell Anderson showing that new families today have a lower standard of living than the baby-boomer generation, even though the Canadian economy has doubled in size since 1976.
And while the share of young women contributing to household incomes is up 53 per cent, average household incomes for young couples overall have remained static since the mid-1970s, after adjusting for inflation. Yet housing prices during the same period rose 76 per cent nationwide.
That’s left Canadian parents raising young kids today squeezed for time, money and child-care services, Prof. Kershaw said.
“What we have now is Generation Squeeze,” he said.
It’s a far rosier picture for boomers, according to the study. Compared to their counterparts in the 1970s, they’re heading into retirement well off because the housing market has nearly doubled over their adult lives, the study shows.

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D - all based on where in the real estate cycle each generation is positioned.

graduating into a recession has decade of impact

http://business.financialpost.com/2011/10/15/generation-unlucky-from-boom-to-gloom/

Having enjoyed a stretch of relative economic prosperity, boomers are now committing younger generations to a fate of austerity and stagnancy — an intergenerational transfer dubbed “fiscal child abuse” by one pundit.

Is this the unluckiest generation?

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D - I have already characterized spend-and-don't-tax (neo-con) as a generationist issue.

Leave the debt to your kids. Nice.

---------------------------

His concern is justified according to research demonstrating that graduating into a recession can have permanent consequences for income and job quality.

“There is a risk that the longer it takes, the more their skills depreciate, and the less attractive they are to employers,” said Philip Oreopoulos, labour economist at the University of Toronto and co-author of a study analyzing the incomes of a large number of Canadian graduates over a 20-year period.

The central finding of the much-cited study: Luck matters.

Those unlucky enough to graduate into a recession face an average initial income shortfall of almost 10%. It takes an average of ten years after graduation to overcome the initial damages.

“They’re significant and real and long-term,” Mr. Oreopoulos said. “For some people, there are lifetime effects.”

While contending with the effects of a recessionary employment market, what’s known interchangeably as Generation Y, the Millennial Generation, or the Echo Boomers also must wrestle with a macroeconomic albatross that could persist long into their working lives.

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D - and hitting the nail on the head:

More and more, baby boomers are indicted by analysts as having handed off to future taxpayers a monumental bill for years of unsustainable finances.

Through their control of politics and elections, boomers “have rationally chosen a path of more consumption today at the expense of future generations,” Jason Hsu, chief investment officer at Research Affiliates said in a recent report.

devil in the details. canada student loan default.

http://student-loan-bankruptcy.ca/

 So, for example, if you graduated in May, 2005, you have to wait until June, 2012 before you can file bankruptcy and expect for your student loans to be automatically discharged.

There is a special rule that says that, in cases of “hardship”, the bankrupt may apply to bankruptcy court after five years to have their student loan reduced or discharged.

In addition, even if a student loan is more than seven years old, it is possible for the government to oppose the former student’s discharge and request that the bankrupt repay some or all of their student loan.

You read that sentence correctly: even if your student loan was more than seven years old when you went bankrupt, the government could object, and you could still end up being required to pay some or all of it back.

If a former student applies under the “hardship” rule for five year old student loans (section 178 (1.1)), or if a creditor opposes the discharge of a bankrupt even when the loans are more than seven years old, the student must satisfy the court of two conditions:

1. they acted in “good faith” with respect to their student loans.
2. they would experience financial difficulty if they were to try to repay the student loan.

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D - so if your situation is dire, you might be able to discharge that student loan at FIVE vs SEVEN years.

But if you don't act in good faith and are not in financial duress,  the gov't may not accept a bankruptcy even at SEVEN.

The easiest way to act in good faith is small but regular token payments. I say token, but I mean an amount you can afford on your budget. Even $50/ month per loan (you cannot favour one over another, despite variable interest rates), which likely is just the interest on the loan, accomplishes that.

Plus your take-home pay better be pretty modest.

If you are living like a rock star with a good job, well, don't say I did not warn you.

D.