What do you think about just converting the loans to interest free? That's the part that I find most objectionable as private institutions are making generous profit for not really doing anything. Whatever people have already paid could just count against the original principal.
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The vast majority of the loans are owned by the govt., not private institutions.
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There's a distinction between a private student loan and federal aid, but the servicers are private institutions.
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You mean the govt. contracts private companies to process payments? Sure. But the loans are all owned by the govt., not by private institutions.
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Right, it's a middleman industry that adds no real value and as the regulations weaken, become more and more predatory. There's no reason the gov't can't process directly. There's likely a way to do it much more simply through the IRS - assuming they were staffed and funded.
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But the interest you pay on loans doesn't go to the middleman, it goes to the govt. Direct govt. processing of loans would do zero to decrease the burden of student loan repayment.
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So, why are those businesses profitable, then?
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A) Their profits are a trivial amount of the burden of student loan repayment. B) If govt. costs exceeded third-party provider costs, it's possible direct processing would increase repayment costs. C) Processing fees are a total and utter red herring in this debate!!
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Just make em dischargeable. Done.
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Why would the govt. do that?
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For all the reasons you stated. Plus maybe that debt is stifling their economic productivity. Definitely should be available to those who got scammed by the for profit frauds.
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Hope we can get them to do it!
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Not sure what percentage but much of the most expensive debt is held by private investors.
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Almost all student loans are now owned by the federal govt., not private investors.
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Wow. I knew it had fallen since 2010 but didn’t realize by that much!
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Big disincentive for people that pay loans or saved to pay for school.https://twitter.com/mingus_coleman/status/1053383719388635136?s=21 …
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Big subsidy for potential future high earners vs average workershttps://twitter.com/economics/status/1053380420132331520?s=21 …
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if you did this, you'd strongly want to also make student loans dischargeable in bankruptcy going forward, to tighten lending standards
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I feel like some of Obama's reforms, like drastically reducing private loans while capping federal loans plus coming down on for profits, already tightened lending. But the bankruptcy provision is key.
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Massive transfer of wealth from the working-class, poor, and old-rich to the upper-middle and future rich.
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