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Crossing the graduation lied to standing in the bailout -- a new report revealing.
Student loan defaults are soaring now in the first two months of the year.
Banks writing off more than three billion dollars in debt.
-- -- now at crisis levels and that has someone here saying it is time to get the government out of this business before it's too late.
Hi everybody I'm David -- welcome to Forbes dot box let's go -- bogus web masters Steve Forbes Rick -- rich -- guard.
Elizabeth MacDonald at John Candy and Morgan.
Brent and so Steve the president said getting the private bags out most of the student loan business and more government and it was a good thing but hasn't made matters worse.
-- David it has it's a prime example of good intentions bad results as a result college costs continue to go up it's killing the middle class spoke for parents and kids.
Instead of being -- -- -- -- career it's not albatross of the debt that she leave wet as agreed now becomes a degree of the dead in this.
And so I think you're gonna see big changes get the government -- of these colleges -- to cut cost.
And have a three years instead of -- four years and on line and those kind of reform -- get an education get ahead.
Instead of starting up behind Rick since the president took office federal direct student loans are up more than 390.
Per -- More than 90% of all student loans now are given by the government is not too much.
Yeah it's I acknowledged the problem this is this is difficult for the kids this is typical for the schools but there is a critical public policy issue here that we just can't forget.
You take away student loans from the government and what -- really saying is that from this moment forward only people with money.
Can go to college we do not want a country where you have to be wealthy to go to college this is not the way to save the middle the middle class this is the way to destroy the middle.
But -- one of the worst things about government loans as they do not check credit records private loans do that 10% or so of student loans are given by Sallie Mae and other private lenders.
They check credit history.
The government does not -- surprise surprise guess whose default that it's a government loans that are defaulting.
Yeah and you know what you have a really negative from feedback loop here college costs have gone up seven and a half percent per year.
Over the last twenty years why because they can because the government loans will always be there.
This bubble is going to pop mean even state universities costs prohibitively.
Right now I mean 30000 dollars per year.
I'm most kids are not gonna get any kind of a return on that investment they're gonna default on their loans.
This is just a big -- that's going to pop and and really do damage to the economy.
Morgan we have now reached the trillion dollar mark that's how much student loans are outstanding and -- as I said 90% of them are government they don't do credit checks.
These are very dangerous loans.
I you know at the whole system needs to be revamped definitely we need to take a look at government loans but I think it right now currently it's still the lesser of two evil -- let's look back at prevalence just for a second.
Yes they might be doing credit history checks but they're also doing variable interest rates Michael up to double digits if you default on that loan.
And -- the repayment options are much more stringent and they are for government backed loans.
And I have companies like Sallie -- better bundling a higher Oakland's.
And selling them off and so called slab loans that still -- -- she wanna talk about a bubble that could have ramifications beyond student loans look at.
-- along that he -- a point is haven't we learned anything from the sub prime that we're still suffering from the sub prime housing prices.
Haven't we learned that -- checked loans are very dangerous and now we have a trillion dollars worth of these loans from students get this progress is no income no job no problem we're gonna give you.
The -- I mean no income no job is what students are faced with right now.
This is the problem.
-- universities and colleges that are -- the middle class family giving it out charging a lot of money for degrees and a cultural impact that soap operas.
And you know that's the issue that the visit that this is my -- universities and colleges serve is really cushy -- nonprofits they live off the taxpayers -- and it's not right.
I would say investing in university stop gouging middle class families get the degrees -- useful in the workforce.
And David get this if you do that if you have degrees of people being get jobs with.
Maybe you get rid of those 83 overlapping federal worker training programs -- -- at the back end and you're right in the beginning with the colleges doing the right thing by middle class families getting them the jobs that they use.
There's kids deserve what we are so John Candy we're so heavily weighted -- these government laws of Federal Reserve Bank of New York.
Just a deciding 93%.
Of student loans -- are made by the government and again.
These are not.
Credit -- I can't emphasize that enough these are according to want to analysts he said anyone who can fog a mirror can get one of these student loans.
Absolutely mean Rick talks about if the feds get out of student loans that call to only be for the wealthy but that's what's happening is the feds are involved in student loans.
They allow colleges to not worry about charging students more and more -- attend them.
If you remove the federal government distortion college left to bring cost back down.
And if -- to what it called eight degrees is valid -- Rick says.
-- banks -- very readily with low students -- less money so they can go to college at a much lower.
Right -- I'd say a whole lot of say I've seen mortgage shake -- head but lending standards are practically nonexistent for these government loans Morgan.
Yes that's true and I do think we need to address that but there's another reason college tuitions are going up and that's a fact that this state that state governments.
Have dramatically cut down their subsidies to their local colleges as well and you have in enrollment rate why do you want out why -- we found another -- -- -- -- while referring subsidies into our rotten system do you -- I am very well yeah.
I think the American people I -- they got to change their business model and stopover try it on I -- pretty but either way the government money is involved one way you look -- -- I'm gonna -- a steady -- admirable position of being put in the middle of this fight go ahead.
What what what what are boils down to instead of continuing a bad thing let's figure out how to get out of it as soon as possible because again and then I was helping get out of its CE mailed I'm EU UU that you -- -- -- you make it very clear universities the days of administrative -- our over.
If you want to borrow -- you have you go to a bank.
And you wanna borrow for an education the banks and -- -- especially the government's not backing back stopping to think they're gonna ask you what degree are you gonna get what kind of job -- -- yeah.
Red -- that's a great question that the fact is is that what am I getting.
For this student load I mean not only is the country at risk because a trillion dollars down to -- but a lot of these college degrees and in things like psychology and anthropology.
-- -- -- -- -- great.
So early and out of -- -- two points number one.
You try and get a decent white collar job today without having a college degree not happened and number two.
You keep talking David about credit worthiness how many seventeen year old kids do you know that have a credit history.
You can't check credit worthy or as I -- well.
Your -- and a family should and by the way you tend Shaq getting John -- the private sector Sallie Mae which is the biggest.
Private student loan lenders -- does very good credit checks on and guess what their default rate is going down.
The government default rate is going up but the private lenders to fall rate is going down because they do credit checks -- -- John anyway.
And they -- -- -- you shouldn't give out loans that you don't think will be paid back and importantly if private banks are making it more difficult for students get loans.
They'll go to calls more quickly they'll do that Steve says in three years rather it would bring it up front -- -- aren't the government -- and there's -- they're not -- that's an appropriate now quick last word from state garner NC government -- cost private sector reduce cost to get more for -- less when you have the private sector involved we should do -- and education stop ripping off the middle class event.
I don't think we're gonna agree -- this would -- thank you very much coming up next.
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