Obama student loan policy reaping… wait for it… $51 billion profitMay 14, 2013
The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation’s most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.
Figures made public Tuesday by the Congressional Budget Office show that the nonpartisan agency increased its 2013 fiscal year profit forecast for the Department of Education by 43 percent to $50.6 billion from its February estimate of $35.5 billion.
Exxon Mobil Corp., the nation’s most profitable company, reported $44.9 billion in net income last year. Apple Inc. recorded a $41.7 billion profit in its 2012 fiscal year, which ended in September, while Chevron Corp. reported $26.2 billion in earnings last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $51.9 billion in profit last year.
The estimated increase in the Education Department’s earnings from student borrowers and their families may cause a political firestorm in Washington, where members of Congress and Obama administration officials thus far have appeared content to allow students to line government coffers.
The Education Department has generated nearly $120 billion in profit off student borrowers over the last five fiscal years, budget documents show, thanks to record relative interest rates on loans as well as the agency’s aggressive efforts to collect defaulted debt. A spokesman from the Education Department did not respond to a request for comment. A Congressional Budget Office spokesman could not be reached for comment after normal business hours.
The new profit prediction comes as Washington policymakers increasingly focus on soaring student debt levels and the record relative interest rates that borrowers pay as a potential impediment to economic growth. Regulators and officials at agencies that include the Federal Reserve, Treasury Department, Consumer Financial Protection Bureau and Federal Reserve Bank of New York have all warned that student borrowing may dampen consumption, depress the economy, limit credit creation or pose a threat to financial stability.
At $1.1 trillion, student debt eclipses all other forms of household debt, except for home mortgages. It’s also the only kind of consumer debt that has increased since the onset of the financial crisis, according to the New York Fed. Officials in Washington are worried that overly indebted student borrowers are unable to save enough to purchase a home, take out loans for new cars, start a business or save enough for their retirement.
Policymakers also are worried about the effect that high interest rates on outstanding student debt may have on the broader economy. Congress sets interest rates on federal student loans, with rates fixed on the majority of loans at 6.8 and 7.9 percent.
But as the Federal Reserve attempts to lower borrowing costs for everyone from households and small businesses to large corporations and Wall Street banks, student borrowers have not been able to benefit.
Compared to a benchmark interest rate — what the U.S. government pays to borrow for 10 years — student borrowers have never paid more, increasing the burden of their student debt as wage increases and yields on investments and bank accounts fail to keep up with the relative increase in student loan interest payments.
President Barack Obama recently asked Congress to tie federal student loan interest rates to the U.S. government’s borrowing costs. In a possible sign of congressional intent, leading Democratic senators on Tuesday proposed legislation that would keep existing interest rates on some student loans for the neediest households fixed at 3.4 percent, rather than allowing them to revert back to their original 6.8 percent rate.
The legislation, dubbed the “Student Loan Affordability Act” and proposed by Senate Majority Leader Harry Reid (D-Nev.), Sen. Patty Murray (D-Wash.), Sen. Jack Reed (D-R.I.), and Sen. Tom Harkin (D-Iowa), aims to help a small subset of future student borrowers who take out loans over the next two years. The bill does nothing for existing student debtors.
"Today’s figures from the CBO underscore the urgent need for Congress to prevent the July 1 interest rate hike and address the crushing debt placed on students," said Tiffany Edwards, spokeswoman for Democrats on the House Education and Workforce Committee.
Rohit Chopra, the Consumer Financial Protection Bureau official overseeing the regulator’s student debt efforts, has warned policymakers to not focus solely on future borrowers.
“The whole student loan problem is a problem that should be of deep concern to this body,” said Richard Cordray, CFPB director, during testimony last month before the Senate Banking Committee. “These are young people that we should care a great deal about.”
“They’re the ones with the ambition, aspirations and dreams, and they’re getting saddled with debt that they don’t understand,” Cordray said of student borrowers. “It’s holding them back and it’s making them unable to rise and succeed and become leaders in our society.”
He added: “It’s a significant problem and we’re going to be doing everything that we can to address it at the bureau.”
The CFPB has been focusing on helping existing borrowers refinance high-rate debt or modify the terms of their loans. In a report earlier this month, the CFPB lamented that borrowers are unable to refinance their obligations after they have graduated from college and secured well-paying jobs.
"Corporate entities, homeowners, and many others have been able to refinance debt at quite low rates, and student loan borrowers are wondering why they can’t do the same," Chopra said.
The CFPB suggests that increased concentration in the student loan market may inhibit refinancings and debt workouts. Lenders and the Education Department profit when borrowers pay higher rates than they otherwise would in a normally-functioning market.
Unlike traditional lenders, though, the Education Department’s profits are barely dented by loan defaults. For loans made in 2013 that eventually default, the department estimates it will recover between 76 cents and 82 cents on the dollar. Bankruptcy rarely discharges student debt.
The Education Department’s collection efforts are aided by loan default specialists, including NCO Group Inc., a company owned by JPMorgan.
Source

Obama student loan policy reaping… wait for it… $51 billion profit
May 14, 2013

The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation’s most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.

Figures made public Tuesday by the Congressional Budget Office show that the nonpartisan agency increased its 2013 fiscal year profit forecast for the Department of Education by 43 percent to $50.6 billion from its February estimate of $35.5 billion.

Exxon Mobil Corp., the nation’s most profitable company, reported $44.9 billion in net income last year. Apple Inc. recorded a $41.7 billion profit in its 2012 fiscal year, which ended in September, while Chevron Corp. reported $26.2 billion in earnings last year. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo reported a combined $51.9 billion in profit last year.

The estimated increase in the Education Department’s earnings from student borrowers and their families may cause a political firestorm in Washington, where members of Congress and Obama administration officials thus far have appeared content to allow students to line government coffers.

The Education Department has generated nearly $120 billion in profit off student borrowers over the last five fiscal years, budget documents show, thanks to record relative interest rates on loans as well as the agency’s aggressive efforts to collect defaulted debt. A spokesman from the Education Department did not respond to a request for comment. A Congressional Budget Office spokesman could not be reached for comment after normal business hours.

The new profit prediction comes as Washington policymakers increasingly focus on soaring student debt levels and the record relative interest rates that borrowers pay as a potential impediment to economic growth. Regulators and officials at agencies that include the Federal Reserve, Treasury Department, Consumer Financial Protection Bureau and Federal Reserve Bank of New York have all warned that student borrowing may dampen consumption, depress the economy, limit credit creation or pose a threat to financial stability.

At $1.1 trillion, student debt eclipses all other forms of household debt, except for home mortgages. It’s also the only kind of consumer debt that has increased since the onset of the financial crisis, according to the New York Fed. Officials in Washington are worried that overly indebted student borrowers are unable to save enough to purchase a home, take out loans for new cars, start a business or save enough for their retirement.

Policymakers also are worried about the effect that high interest rates on outstanding student debt may have on the broader economy. Congress sets interest rates on federal student loans, with rates fixed on the majority of loans at 6.8 and 7.9 percent.

But as the Federal Reserve attempts to lower borrowing costs for everyone from households and small businesses to large corporations and Wall Street banks, student borrowers have not been able to benefit.

Compared to a benchmark interest rate — what the U.S. government pays to borrow for 10 years — student borrowers have never paid more, increasing the burden of their student debt as wage increases and yields on investments and bank accounts fail to keep up with the relative increase in student loan interest payments.

President Barack Obama recently asked Congress to tie federal student loan interest rates to the U.S. government’s borrowing costs. In a possible sign of congressional intent, leading Democratic senators on Tuesday proposed legislation that would keep existing interest rates on some student loans for the neediest households fixed at 3.4 percent, rather than allowing them to revert back to their original 6.8 percent rate.

The legislation, dubbed the “Student Loan Affordability Act” and proposed by Senate Majority Leader Harry Reid (D-Nev.), Sen. Patty Murray (D-Wash.), Sen. Jack Reed (D-R.I.), and Sen. Tom Harkin (D-Iowa), aims to help a small subset of future student borrowers who take out loans over the next two years. The bill does nothing for existing student debtors.

"Today’s figures from the CBO underscore the urgent need for Congress to prevent the July 1 interest rate hike and address the crushing debt placed on students," said Tiffany Edwards, spokeswoman for Democrats on the House Education and Workforce Committee.

Rohit Chopra, the Consumer Financial Protection Bureau official overseeing the regulator’s student debt efforts, has warned policymakers to not focus solely on future borrowers.

“The whole student loan problem is a problem that should be of deep concern to this body,” said Richard Cordray, CFPB director, during testimony last month before the Senate Banking Committee. “These are young people that we should care a great deal about.”

“They’re the ones with the ambition, aspirations and dreams, and they’re getting saddled with debt that they don’t understand,” Cordray said of student borrowers. “It’s holding them back and it’s making them unable to rise and succeed and become leaders in our society.”

He added: “It’s a significant problem and we’re going to be doing everything that we can to address it at the bureau.”

The CFPB has been focusing on helping existing borrowers refinance high-rate debt or modify the terms of their loans. In a report earlier this month, the CFPB lamented that borrowers are unable to refinance their obligations after they have graduated from college and secured well-paying jobs.

"Corporate entities, homeowners, and many others have been able to refinance debt at quite low rates, and student loan borrowers are wondering why they can’t do the same," Chopra said.

The CFPB suggests that increased concentration in the student loan market may inhibit refinancings and debt workouts. Lenders and the Education Department profit when borrowers pay higher rates than they otherwise would in a normally-functioning market.

Unlike traditional lenders, though, the Education Department’s profits are barely dented by loan defaults. For loans made in 2013 that eventually default, the department estimates it will recover between 76 cents and 82 cents on the dollar. Bankruptcy rarely discharges student debt.

The Education Department’s collection efforts are aided by loan default specialists, including NCO Group Inc., a company owned by JPMorgan.

Source

A Facebook friend of mine sent me this video and asked for my thoughts
April 16, 2013

My response was so long, I thought it a waste not to post here. Response starts below:

Well, you may not have known what you were getting yourself into when you asked for my thoughts cos I have a whole essay’s worth of thoughts – lol!:

On our financial system: our financial system for sure doesn’t make any sense – it is unstable and crisis is built into our capitalist system. Among other problems, competition & unsustainable growth are built into the system – there is no way our system can continue for very long without serious reforms or absolute fundamental change (which is really what needs to happen). Competition is great, but the problem with competition is that somebody eventually wins. And when they do, power & money & the ability to accumulate more of both concentrates in the hands of a few, driving the disparity, subverting regulation, and eventually leading to economic disaster.

I can imagine a few alternatives & solutions to this problem and I have in-mind what I believe would be the most possible/likely-to-succeed/least-bloody solution, but ultimately, I’ll jump on board to pretty much anything that answers the problems created by our capitalist system if it becomes popular enough & has strong enough of a possibility of success & doesn’t involve hurting lots of other people.

On RussiaToday as a news source: RussiaToday, like all large news providers (save for Democracy Now, if you want to count that), is biased toward the agenda of the powers they are beholden to. For us in the United States, that’s the corrupt corporate interests that govern our system.

For RussiaToday, that’s Russian state interests. They use real information & real facts, but often frame them in misleading or hyperbolic ways. Amidst major crises, they report facts early and incorrectly often. They feature U.S. stories predominately featuring violence, brutality, and crisis in the U.S. They intentionally try and foster negative feelings about the U.S. and give extensive coverage to news relevant both to the American left and to libertarian/Ron-Paul people – the two largest ‘dissident’ communities in the U.S. That’s their U.S. audience – people who could cause problems for U.S. state interests.

As part of that community, it’s a great & powerful resource. Lots of good information covered extensively about police brutality & our military-industrial-complex that doesn’t get that kind of coverage otherwise. At the same time, when they cite statistics or post stories about how the U.S. government is finally coming ‘for your guns’, I kind of just roll my eyes and tune them out and wait to see if I see it reported on DemocracyNow or TruthOut or SocialistWorker or AlJazeera (which has it’s own problems). So… I find them to be a good source for conglomerated news stories that a ‘dissident’ or a leftist might be interested in, but it’s always important to me, when reading RussiaToday, that I find other sources to confirm what is being reported.

Recommended related sources:

Sorry for the really long response!

-Robert

Student debt load deepens - reaches 1 in 5 households
September 28, 2012
One in five American households now owes money on student loans — more than double the percentage of households and nearly triple the average amount of college debt of two decades ago. That’s causing a ripple effect across the economy, stalling new car purchases and home ownership for young middle-class households that face longer-term debt, paying off their student loans, according to two separate reports released this week. Since 2007, the number of Americans carrying student debt has increased in nearly every demographic and economic category, as has the size of that debt, a Pew Research Center analysis of newly available government data shows. Student loan debt in Wisconsin has slashed new-car purchasing and made owning a home less likely for young middle-class households, found a separate survey by the liberal special interest group, Institute for One Wisconsin in Madison. "The trillion-dollar student loan debt is not just a crisis for students," said Scot Ross, the Wisconsin organization’s executive director. "It is literally standing between college graduates and their share of the American dream and a more robust economic recovery both nationally and, as shown by our research, in Wisconsin." Those in the Wisconsin survey with bachelor’s degrees reported making an average monthly student loan payment of $350, while those with graduate or professional degrees paid an average $448 monthly. Those without a monthly student loan payment bought new and used vehicles at about the same frequency. But the likelihood of buying a new vehicle, rather than a used vehicle, was influenced by student loan payments. Fifty-two percent of those in the Wisconsin survey who had never had a student loan were likely to buy a new vehicle, rather than a used vehicle, compared with 32.8% who were paying a student loan. The length of student loan debt was nearly 19 years for persons with bachelor’s degrees and over 22 years for those with graduate or professional degrees in the Wisconsin survey. Tiffany Koehler, who has a four-year college degree, doesn’t expect to pay off her student debt for 30 years. She said she’d love to buy a fuel-efficient car to replace the 2000 Ford Explorer passed down from her godfather. But the 42-year-old Greenfield woman said she is living paycheck to paycheck, working full-time as a director for a non-profit, and paying off a combined $52,000 student loan debt from her bachelor’s degree in political science at Cardinal Stritch University, plus one year of seminary. Her monthly student loan payments total $475, more than a typical new car payment. "I have been self-sufficient, never in legal trouble, I walk the straight-and-narrow and cannot even grasp at the American Dream of owning property. My retirement in 30 years looks like a used trailer in the desert of Arizona," Koehler said. "The American dream is changing for a lot of us." The Wisconsin survey also suggested a link between renting and student loan debt, decreasing as income exceeds $150,000. Eighty-five percent of renters with a household income of $50,000 to $75,000 in the survey were currently paying on a student loan. The survey found an increasing reliance on private student loans vs. government loans, and more young adults consolidating loans, which the institute attributed to the 1996 Student Loan Marketing Association Reorganization Act. That act spun off the formerly government-sponsored Sallie Mae corporation as a private company.
Source

Student debt load deepens - reaches 1 in 5 households

September 28, 2012

One in five American households now owes money on student loans — more than double the percentage of households and nearly triple the average amount of college debt of two decades ago. 

That’s causing a ripple effect across the economy, stalling new car purchases and home ownership for young middle-class households that face longer-term debt, paying off their student loans, according to two separate reports released this week. 

Since 2007, the number of Americans carrying student debt has increased in nearly every demographic and economic category, as has the size of that debt, a Pew Research Center analysis of newly available government data shows. 

Student loan debt in Wisconsin has slashed new-car purchasing and made owning a home less likely for young middle-class households, found a separate survey by the liberal special interest group, Institute for One Wisconsin in Madison. 

"The trillion-dollar student loan debt is not just a crisis for students," said Scot Ross, the Wisconsin organization’s executive director. "It is literally standing between college graduates and their share of the American dream and a more robust economic recovery both nationally and, as shown by our research, in Wisconsin." 

Those in the Wisconsin survey with bachelor’s degrees reported making an average monthly student loan payment of $350, while those with graduate or professional degrees paid an average $448 monthly. 

Those without a monthly student loan payment bought new and used vehicles at about the same frequency. But the likelihood of buying a new vehicle, rather than a used vehicle, was influenced by student loan payments. Fifty-two percent of those in the Wisconsin survey who had never had a student loan were likely to buy a new vehicle, rather than a used vehicle, compared with 32.8% who were paying a student loan. 

The length of student loan debt was nearly 19 years for persons with bachelor’s degrees and over 22 years for those with graduate or professional degrees in the Wisconsin survey. 

Tiffany Koehler, who has a four-year college degree, doesn’t expect to pay off her student debt for 30 years. 

She said she’d love to buy a fuel-efficient car to replace the 2000 Ford Explorer passed down from her godfather. 

But the 42-year-old Greenfield woman said she is living paycheck to paycheck, working full-time as a director for a non-profit, and paying off a combined $52,000 student loan debt from her bachelor’s degree in political science at Cardinal Stritch University, plus one year of seminary. 

Her monthly student loan payments total $475, more than a typical new car payment. 

"I have been self-sufficient, never in legal trouble, I walk the straight-and-narrow and cannot even grasp at the American Dream of owning property. My retirement in 30 years looks like a used trailer in the desert of Arizona," Koehler said. "The American dream is changing for a lot of us." 

The Wisconsin survey also suggested a link between renting and student loan debt, decreasing as income exceeds $150,000. Eighty-five percent of renters with a household income of $50,000 to $75,000 in the survey were currently paying on a student loan. 

The survey found an increasing reliance on private student loans vs. government loans, and more young adults consolidating loans, which the institute attributed to the 1996 Student Loan Marketing Association Reorganization Act. That act spun off the formerly government-sponsored Sallie Mae corporation as a private company.

Source