<nettime> Zero Hedge: US Govt's Message For Heavily Indebted Students: Don't Pay Us Back

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http://www.zerohedge.com/news/2015-05-21/governments-message-heavily-indebted-students-dont-pay-us-back

The Government's Message For Heavily Indebted Students: Don't Pay Us Back
Tyler Durden
05/21/2015 21:35 -0400

Over the course of several years, we've chronicled virtually all aspects
of America's $1.3 trillion student loan bubble.

We've discussed, for instance, the Treasury's projections of a $3.3
trillion student debt nightmare by 2025. We've also outlined why the
official data on delinquencies almost assuredly understates the case.
The numbers you see, have been adjusted twice. Instead of taking the
number of delinquent borrowers over the number of borrowers in
repayment, the official figures instead report the number of delinquent
borrowers over total borrowers, even those in deferment and forbearance,
which ensures the delinquency ratio will be far lower than it would
otherwise be. But that's not all. Borrowers making no monthly payments
due to their enrollment in the  government's Income Based Repayment
program are not counted as delinquent because in a society built on
debt, a "payment" of $0 counts as a "qualified payment" towards the 300
monthly installments needed for the government to "forgive" the balance
of the loan. The delinquency data has effectively been "Liesman'd".

Moody's (when they aren't busy sparking bank runs) has warned that the
proliferation of $0 Income Based Repayment plans threatens to plunge
billions in student loan-backed ABS into default and based on the
following official Department of Education letter that's sent to
students coming off of the 6-month post-graduation grace period, we can
see why the ratings agency is concerned because as you can see, the
government can't wait to tell students how they can avoid repaying their
debt.

     Dear XXX,
     
     Your loan servicer, Great Lakes Educational Loan Services, Inc., has
     contacted you or will be contacting you soon about your repayment
     options for your federal student loan. As you consider these options,
     the U.S. Department of Education wants to remind you that you may
     qualify for a repayment plan that calculates your monthly payment based
     on your income.
     
     You will likely qualify for an income-driven repayment plan if your
     total federal student loan debt exceeds your annual income. Under an
     income-driven plan, your initial payment could be as low as $0 per
     month.
     
     When you make payments based on your income, your loans are paid off
     over a longer period of time than the standard 10-year plan. While this
     reduces your monthly payment amount, it also increases the total amount
     you pay over time. But if you work for the government or a
     not-for-profit employer, you may qualify to have your remaining loan
     balance forgiven after 10 years of payments under the Public Service
     Loan Forgiveness Program.
     
     We encourage you to use our repayment estimator to estimate your monthly
     payments under our income-driven plans and see if you might qualify.
     Your loan servicer can also help you better understand your repayment
     options.
     
     Thank you,
     
     U.S. Department of Education


We'll leave you with the open letter we penned to the Class of 2015
earlier this month:

     Dear Class of 2015,
     
     Because we recognize your plight, allow us to provide you with a bit of
     friendly advice as it realtes to your student loans. Once you are
     uncerimoniously thrown from your dorm into the less-than robust US jobs
     market, you will likely discover that contrary to what you were told in
     your economics courses, the US economy is but a shadow of its former
     self. Because you probably didn't study to become a petroleum engineer,
     you will likely find your student debt burden to be quite onerous. The
     key to having it discharged is to make just enough money to stay clear
     of bankruptcy, but not enough to really survive above the poverty line.
     This is because it's hard to have student debt discharged in the event
     you go completely broke. However, if your discretionary income is so
     small as to render you incapable of making payments, the government will
     start you on a program whereby a monthly payment of zero dollars counts
     towards the 300 "payments" you need to make to have your debt forgiven.
     Toe this line carefully (i.e. don't slip up and start making too much
     discretionary income) and the entirety of your student debt will be
     forgiven in 25 short years without your ever having to pay a dime.
     
     You're welcome,
     
     Zero Hedge


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