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Will Obama's Student Debt plan end the housing drop?


By StoutFiles   Follow   Thu, 27 Oct 2011, 3:25am PDT   2,699 views   21 comments
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From what I'm reading, this will limit monthly payments to 10% of annual income and forgiveness after 20 years. If a payment in the 800-1000 range becomes a much more manageable number and not a second mortgage, will housing prices begin to shoot back up as people who were held back by their payments go back to stretching out their money as far as it will go?

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corntrollio   Thu, 27 Oct 2011, 3:46am PDT   Share   Quote   Permalink   Like   Dislike     Comment 1

Probably not -- even three years of the max amount of federal student loans for grad school accrued earlier this decade would be within 10% of net income even if you made $40K, although if you have four full years, your payment might drop a bit.

Forgiveness after 20 years is up to 20 years off.

The consolidation thing could help if the interest rate is dropped 0.5%, although they haven't released details on this. Still, this won't lower payments that much for people who consolidated at record low rates when you could do that. (they, of course, wouldn't be considered record low rates today)

DrPepper   Thu, 27 Oct 2011, 3:52am PDT   Share   Quote   Permalink   Like   Dislike     Comment 2

I doubt it. I think other increases in costs of goods or energy will eat up any savings that might have been applied to mortgages.

corntrollio   Thu, 27 Oct 2011, 7:08am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 3

Just read the details of the plan (which weren't available when I read about it earlier). Apparently the only people who will benefit are those who took a loan under federal loan programs from 2008 or later -- i.e. relatively noob graduates. The 2008 and later programs are the direct federal loan programs.

If you had loans from the pre-2008 programs, which were through banksters, you are not eligible unless you also have a loan from 2008 and later that was through the direct loan program.

If it's mostly about new graduates, then it really won't have much effect on the home buying market.

HousingWatcher   Thu, 27 Oct 2011, 7:26am PDT   Share   Quote   Permalink   Like   Dislike     Comment 4

What's the point of Obama's program anyway? With or without it, the majority of these loans will never be paid back since these graduates don't have jobs or jobs that pay enough to re-pay the loans. New college graduates have a 14% + unemployment rate.

PockyClipsNow   Thu, 27 Oct 2011, 7:37am PDT   Share   Quote   Permalink   Like   Dislike     Comment 5

The point is vote buying for all the students in college now and unemployed recent grads. They have tons of time to 'OWS'. Anyone who graduated with pre-2008 loans is probably working thus will not protest.

I think OWS is working! more free shit is being handed out to the beggars.

Next there will be more 1%er taxes and they will fully fund the government unions at every level.

corntrollio   Thu, 27 Oct 2011, 8:51am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 6

PockyClipsNow says

Anyone who graduated with pre-2008 loans is probably working thus will not protest.

How do you get that?

a) the surveys both on the ground and the one that I cited earlier suggest that many OWS supporters have jobs
b) if you entered college or grad school in 2007 and graduated in 2011, you can do the math...

Katy Perry   Thu, 27 Oct 2011, 9:28am PDT   Share   Quote   Permalink   Like   Dislike     Comment 7

This has got to be good for the banks somehow,.. not the loan holders.
you mean to tell be that the Government is going to do something That will actually work for the people. what a bunch of BS.

A) it won't work if the Banks aren't making more money from this in the long run.

B) obviously the better thing would most likely be for the students to just default on the loans and That's most likely why this is even being proposed.

corntrollio   Thu, 27 Oct 2011, 9:52am PDT   Share   Quote   Permalink   Like   Dislike     Comment 8

Katy Perry says

This has got to be good for the banks somehow,.. not the loan holders.
you mean to tell be that the Government is going to do something That will actually work for the people. what a bunch of BS.

Actually, in this case, the direct loan program does not benefit banksters. The older loans which were from banks (the program is known as FFEL) can be affected however -- by being paid off if they are consolidated with direct loans

FFEL was a huge handout to the banks -- the federales determined the interest rate, but the benefit went to the banks, and the feds backed the loan. Heads the banks win, tails the feds lose.

Now the feds cut out the middle man and do direct loans. It makes a lot more sense.

The income based repayment is only applicable to direct loans, as is the 20 year forgiveness. The loan consolidation is only for people who have direct loans and FFEL loans.

So in sum:
the 10% threshold + 20 years forgiveness -- doesn't help banksters unless someone now has more money to pay other loans
loan consolidation -- does help banksters because FFEL loans get paid in full (early)

you pay for my stuff   Thu, 27 Oct 2011, 9:56am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 9

Also similar to the student debt plan, the underwater refinancing seems to have stopped it for a bit. Today, I noticed TONS of short sale listings get cancelled. I guess they are going to try to refinance. This certainly took lots of distressed properties off the market.

Now let's see when this goes into effect and if it's successful.

Refinance now or be priced in forever!

corntrollio   Thu, 27 Oct 2011, 10:06am PDT   Share   Quote   Permalink   Like   Dislike     Comment 10

you pay for my stuff says

Today, I noticed TONS of short sale listings get cancelled. I guess they are going to try to refinance.

So you think it's just a coincidence that many MLSes put up listings for 90 days and it happens to be near the end of the month?

The underwater financing applies to a limited group:

In general, borrowers must meet the following criteria:

 The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
 The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
 The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
 The current loan-to-value (LTV) ratio must be greater than 80%.
 The borrower must be current on the mortgage at the time of the refinance, with no late payment in the past six months and no more than one late payment in the past 12 months.

My guess is that some people who have been paying as due will refi, but I doubt all the people short-selling are current and also meet the other criteria. Some of them probably even have non-GSE loans, which are far more likely to be underwater than GSE loans.

Umai   Thu, 27 Oct 2011, 10:07am PDT   Share   Quote   Permalink   Like   Dislike     Comment 11

One question I don't understand why anyone asks...is why the RENT IS TOO DAMN HIGH...err, I mean the TUITION is too damn high. OWS is so torn up over the banks and the student debt...look at a graph of Tuition (private and public)... THAT is a ton of the problem, the subsequent debt is just the hangover. [said just finally paying those leeches at Sallie off!!! only took 18 years, yahoo!]

everything   Thu, 27 Oct 2011, 12:27pm PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 12

Not with where incomes are going. Back in the 90's I remember you could wait, I think 5 years interest free, then you finally get a letter in the mail with payment booklets. I chose to work myself through college and work myself into the ground on summers, never a spring break for me. Went to tech school before that but it was so cheap back in the late 80's, I paid for books and tuition out of savings. Scary that anyone would mention 800-1000 for a monthly payment, back in 1995 one semester tuition at a state college was still less than a thousand.

Obama needs young voters, and people will vote for or follow anyone who tosses them a bone, if you want to find a friend, feed any animal.

you pay for my stuff   Thu, 27 Oct 2011, 1:16pm PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 13

I'm waiting for this same policy to be applied towards mortgages issued 2004-2006. Maximum payments of 33% of your monthly income, forgiven after 30 years. You guys will **** bricks.

corntrollio   Fri, 28 Oct 2011, 9:18am PDT   Share   Quote   Permalink   Like   Dislike (1)     Comment 14

everything says

Back in the 90's I remember you could wait, I think 5 years interest free, then you finally get a letter in the mail with payment booklets.

I doubt it was five years unless you mean the 4 years (or however long) you were in school + 6 month grace period after you leave school.

But yeah, it was dirt cheap in 1990 to go to most state schools, including the UCs. Even private universities had tuition levels much more reasonable than today.

¥   Fri, 28 Oct 2011, 9:50am PDT   Share   Quote   Permalink   Like   Dislike     Comment 15

corntrollio says

it was dirt cheap in 1990 to go to most state schools, including the UCs

UC was IIRC $600-ish a quarter in 1990, and that included full health insurance (which costs $400/quarter alone now).

1987-1989, I was able to work ~30 hours a week and save $3000 for a PC too.

DennisN   Fri, 28 Oct 2011, 6:51pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 16

When I attended UCSC 1971-1975, the "tuition" (fees) was $229.50 per quarter. And that included an unlimited bus pass on the county bus line.

B.A.C.A.H.   Sat, 29 Oct 2011, 2:19pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 17

Dennis, back in the day, my educations at the public universities was very low, too. So low, that there were times when my being a student was for me, a sort of a hobby on the side. And I knew lotsa of others like me at the time.

I never forgot that somebody was paying for my education, certainly at those prices it wasn't me: it was, in those days, the Largesse of The California Taxpayer.

SJ   Sat, 29 Oct 2011, 2:52pm PDT   Share   Quote   Permalink   Like   Dislike (2)     Comment 18

I remember 20 years ago when I was a college student that my tuition was like only 2k a year at UC. Dirt cheap compared to today's costs.

B.A.C.A.H.   Sat, 29 Oct 2011, 3:13pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 19

SJ,

Like for me in my day, it was dirt cheap for you. It was not dirt cheap for someone else: California Taxpayers were picking up the tab.

tts   Sat, 29 Oct 2011, 8:35pm PDT   Share   Quote   Permalink   Like   Dislike     Comment 20

The program is a joke, look at this crap.

http://www.theatlantic.com/business/archive/2011/10/obamas-student-loan-action-wont-have-much-impact/247411/

The money quote:

For the average borrower, the impact would be small. In 2011, Bachelor's degree recipients graduating with debt had an average balance of $27,204, according to an analysis done by finaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.

Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn't going to save the economy. While borrowers with bigger balances would save more, this is the average. And even someone with $100,000 in loans would only cut their monthly payments by $28.50.

mdovell   Sun, 30 Oct 2011, 1:18am PDT   Share   Quote   Permalink   Like   Dislike     Comment 21

The amounts are just so low that it won't really do much. Besides if people are in debt and shack up together in dorms that means they'll do the same with apartments. Maybe you might see some apartment vacancies lower a tad but not much else.

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