I wonder if defenders of the student loan sharking industry, like Senator Ben Nelson of Nebraska or Representative Virginia Foxx of North Carolina, give a damned about default rates. Probably not. (Nelson is in bed with Nelnet, and Foxx is a huge supporter of the banks and deregulation. And as we're all aware, deregulation has done wonders for the health of the U.S. economy. I think Foxx might be onto something).
"Well, sure! I'm up for sale, Mr. Nelnet. You betcha."
Those rates would be higher if not for deferments and IBR. I think IBR was made precisely because otherwise there would have been mass defaults.
Do you think that's the only reason why IBR was created? Just curious.
Don't they wind up getting more money from you in the long run through IBR? I took a look at it, not detailed look to be sure, and it smelled kinda like those "interest-only" housing offers that should probably come with a heavy leather harness and a "Welcome, sharecropper" sign. But that's just my impression . . .
There are only a few thousand people in IBR. It is a new program; in addition, like ICR, it is likely to be unpopular unless it is made mandatory for all borrowers. And those in ibr are are almost all good borrowers.
Most people in deferment are in educational deferments. As for those in unemployment and economic hardship deferments, most of them quickly return to active repayment after a temporary respite. One of the biggest myths is that deferments and IBR are bad borrowers.
I just enrolled in IBR, and so far the "sharecropper" aspect has been from Sallie Mae. The company is amazingly prone to mistakes. But the program itself caps your payments at 15% of income, and after 25 years of payments, the balance is forgiven. You just have to keep re-enrolling every year with Sallie Mae (should be fun).
The way I saw it, my loans were already in sharecropper status - Sallie Mae splits every loan under repayment into two parts, and then somehow applies the interest to each in different ways so that the balances on my loans are going up. This is most obvious on the small loans - a loan that was originally $974 is, after 3 years of paying extra on it, now $1,148 in principal.
At least under IBR, payments are limited so I know I won't be screwed if I ever lose income. Because from what I can tell, the only thing worse than loans in repayment with Sallie Mae is loans in forbearance with Sallie Mae... Your payments double at the end, there are fees added, interest is capitalized. It's a mess.
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