Privatize the Gains, Socialize the Losses H.R. 2366
If you're a taxpayer, (probably most of us) get ready to take cover.
Private Industry and Government are starting to realize that student's can no longer repay their debts.
With defaults on the rise, the U.S. House of Representatives introduced H.R. 2366 on May 4, 2017.
If passed via the House > Senate > President, this would effectively allow students to wipe their debts clean via bankruptcy. Albeit, destroying their credit in the process.
I see no positive way out of this, the banks always get their money in the end, and guess who will be paying for it… that's right, you and me. Most student loans are subsidized by the government, and at this time, it is unclear how broad this bill will be and the type of loans to be covered. It is estimated to cover approximately $1.4 trillion in student loan debt. To put that in perspective, the Emergency Economic Stabilization act, also known as the "Bank Bailout of 2008" cost tax payers approximately $500 Billion in funds. The TARP Program authorized $700 billion for troubled mortgage assets. Combined this totals $1.2 Trillion in bailouts. This is a double edge sword for the student, on one hand, you won't have to worry about paying back your loans, but you also won't be able to get a loan for sometime… Auto Loan, Home Loan etc.. The wheels continue to turn, but at what cost?
https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
https://www.congress.gov/bill/115th-congress/house-bill/2366/text
SAD BUT TRUE
We shouldn't have bailed out the banks in 2007. It set a terrible precedent.
Great post, followed.
This is just a restoration of the system that was in effect before the Clintons made it illegal to discharge the debt under bankruptcy. This allowed the government to effectively put these kids into debt slavery for the rest of their lives.
There is no good outcome here short of cancelling future government-guaranteed student loans. There are plenty of people in their 40's now who owe more thanks to interest and penalties than they borrowed after paying on the debt for 15 years.
At what point do you just call force majeure, tell the banks they're only going to get $0.25 to $0.50 (at best) on the dollar of outstanding debts and write the debt off.
This is what should have happened with the robo-signed mortgages in 2007-8 but, no.