Students?

Al right folks, as promised here is my view on the Student loan legislation that Obama signed recently. Before that just sharing something that I think about student loans; I feel that like the current mortgage fiasco we are dealing with, this is another big big problem that the US is going to have to deal with at some point, likely sooner rather than later. But that's another topic... The real issue is that the "loanees" (AKA students AKA generally young and naive and with generally little true financial acumen) carry a burden that few other borrowers face - the inability to discharge your debt via bankruptcy. So my point; no loan is a good loan! Trust me I know!! I am dealing with a few myself.

Basically this legislation takes away the student loans from banks and funds it directly. So many would be happy to know that the money borrowed from in college will be the lenders they pay every month to. No need to worry about loans being sold and resold. But like are any other legislation's obviously there are good and bad. So, let look at the Pros first:

Basically all schools starting this 2010 summer will be offering "direct lending" which cuts out the corporate lending middleman, meaning a lower interest rate! This legislation also reduces IBR (Income-Based Repayment) to 10% of above-line income instead of 15%, and forgives non-PI (Private Investor) loans after 20 years instead of 25... but this part will only apply to loans initiated after July 1, 2014. Nobody currently in or applying will benefit from this part of the reform (although it will definitely benefit the future generations). This makes me sad face, as a few I care about are currently in schll.. lol

Now the bad part; The biggest losers obviously would be the middleman, banks. So banks' easy profit off of these student loans while the government bears the risk would now be gone. Which also means there is no competition. It also means banks would now be down in profits that is used to lend back to the community. So this might create a slow but a clear way for a few banks to go down.

So the bottom line; though waste will decrease, I doubt and will be very surprised if the program becomes more efficient and has less problems. Here is another perspective for you guys to think about; How are college graduates supposed to juggle student loan payments with the realities of an imploding job market and family members too caught up in their own financial turmoil to help out? With all the attention focused on failing banks and government bailouts, the very legitimate panic felt by such graduates risks getting lost in the shuffle.

There you go my two worthless pennies ;)