Next market bubble is student loans?

[linkin06]

https://www.bloomberg.com/features/2016-sheila-bair-student-debt/

"Some 43 million Americans, she learned, collectively carry nearly $1.4 trillion in student debt, making it the second-largest source of household debt after home mortgages, according to the Federal Reserve. The federal government owns or backs more than 90 percent of it. More than 42 percent of federally owned student loans aren’t being repaid as expected or on time."

I know it's been posted before, but I guess my conspiracy theory is that this could affect PSLF. If/when the bubble pops could coincide conveniently when PSLF is going to start paying out...and they may cap it?

I personally will pay off my loans in the first year or two out of residency, I pray.

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[deleted480308]

There have already been proposals to cap pslf at $50k

 

[sazerac]

It always baffles me why, in an era of programs like REPAYE, people can't (or won't) pay heir student loans. Paying 10% of your discretionary income over and above 150% of the poverty line? That's like refusing to pay your state income taxes.

In fact, somebody in California (a high income tax state) with student loans of any amount (even hundreds of thousands of dollars of medical school loans) could move next door to Nevada (a no income tax state) and spend their former state income taxes on student loans instead. Basically they would have gone to medical school for free.

 

[Doctor Bagel]

It always baffles me why, in an era of programs like REPAYE, people can't (or won't) pay heir student loans. Paying 10% of your discretionary income over and above 150% of the poverty line? That's like refusing to pay your state income taxes.

In fact, somebody in California (a high income tax state) with student loans of any amount (even hundreds of thousands of dollars of medical school loans) could move next door to Nevada (a no income tax state) and spend their former state income taxes on student loans instead. Basically they would have gone to medical school for free.

The problem is people don't know about those programs, and it sounds like servicers aren't doing a good job getting people enrolled in those programs. We're all in these types of programs because we're on top of this stuff. The big defaults are coming from people who attended community college or trade school for a few semesters, didn't graduate and borrowed maybe $10 to $20k. They move on with their life and assume there's no way to pay their loans. In other countries, I believe they process your repayment applications along with your taxes and automatically get people into those income based programs.

 

[Student Loan Planner]

The loan servicers' incentives are for cost minimization when bidding for the federal contract and not making errors on saying things like "you're on a recorded line."

Major difference w student loans vs the housing crisis is virtually all the bad risk is with the federal govt instead of the private lenders, which cherry pick the most credit worthy borrowers for their own portfolios. The mass defaults that will happen in 20 years will just cause the government to drastically raise taxes. Democrats want PSLF capped at $57.500, Republicans want it gone for new borrowers completely, that means its days are numbered, but probably just for future borrowers.