This blog used to be about debt. Now it's about a few more things. But really, it all comes back to debt. Trust me.

Friday, January 26, 2007

Debt For Life


Interesting advice column question over at Salon.

"Dear Cary, I've recently been giving some thought to donating eggs. I don't exactly need the money because I have a job that pays me a very decent, if not at all extravagant, amount of money, and I can cover my expenses comfortably, but it would be nice to pay off a big chunk of my $11,000 in student loans...."
Have you done anything you're not proud of because of your debt burden? Are there dreams you put off? People you compromised? Ideas you sold out?

Make your confessions in the comments. I've set them to unmoderated just for this purpose. Feel free to be anonymous!

Thursday, January 18, 2007

Everything Is Connected


Funny how related events happen in pairs. Sallie Mae, which you may know as the country's largest student loan lender, announced earnings to Wall Street today, just one day after congress tried to halve student loan interest rates over 5 years.

It wasn't pretty. And it had nothing to do with the watered down bill congress passed. Last year's quarterly earnings per share: 96 cents. This year's quarterly earnings per share: 2 cents. Ouch.

Why? Because their derivatives and hedging business took a $245 Million dive.
Uh. Derivatives and hedging?

And now a brief summary of Sallie Mae's business model:

Case 1
Sallie Mae loans Mildred money.
Mildred pays the money back over many years.
Sallie Mae makes tons of money.

Case 2
Sallie Mae Loans Franky money.
Franky pays his bill for a couple of months.
Franky gets wise and decides to move to Micronesia, where no debt collector can find him.
Sallie Mae makes tons of money.

That's right. Even if you default on your student loans, the government guarantees the amount and the interest you would have paid to student loan lenders.

After many years of perfectly legal lobbying, congress made it virtually impossible for student loan lenders to lose money.

My momma always told me to stay away from derivatives and hedging.

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100 Hours Down, 8660 To Go

Let's put this baby to rest. The energy bill was passed today, bringing the sleepy 100 hours of the new democratic congress to a close. It was more than 100 hours altogether, but let's not expect them to work holidays. Or weekends. Or 5 days a week.

I promise, this is the last time this checklist will ever appear on Naked Debt.

100 Hours Checklist
Tuesday, January 9 - Implement the 9/11 Commission Recommendations

Wednesday, January 10 - Increase the Minimum Wage

Thursday, January 11 - Expand Stem Cell Research

Friday, January 12 - Allow Negotiation for Lower Prescription Drug Costs

Wednesday, January 17 - Cut Interest Rates on Student Loans

Thursday, January 18 - End Subsidies for Big Oil and Invest in Renewable Energy

Wednesday, January 17, 2007

One Small Step For Students

Just updating the checklist for you all. The much talked about student loan bill passed the house of representatives today. While scaled back, it will probably become more comprehensive in the Senate. No one knows if it will survive W's veto pen.

Keep your fingers crossed. Read the full bill here. And scroll down for some escapist debt humor!

100 Hours Checklist! (onl y one more day for this masterpiece of design and content ;-))
Tuesday, January 9 - Implement the 9/11 Commission Recommendations

Wednesday, January 10 - Increase the Minimum Wage

Thursday, January 11 - Expand Stem Cell Research

Friday, January 12 - Allow Negotiation for Lower Prescription Drug Costs

Wednesday, January 17 - Cut Interest Rates on Student Loans

Thursday, January 18 - End Subsidies for Big Oil and Invest in Renewable Energy

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Interest Rates Halved! (for a half a year)



A little known concession in the incredible shrinking student loan bill: when student loan interest rates are finally cut in half after 5 years, they'll go back up to 6.8 percent after only 6 months!!

More from inside higher ed:

As critics (read: lenders) noted that the legislation ( H.R. 5), as written, would let the interest rate zoom back up to the current 6.8 percent in January 2012, after just six months at the low of 3.4 percent, Democratic staffers explained that budget rules and fiscal realities required that compromise. They also said they fully expected to find money in the intervening years to make the cut permanent.
Meanwhile, the White House fully expects to oppose the plan altogether.



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Tuesday, January 16, 2007

Veto Destiny


Remember the plan to cut student loan interest rates in the first 100 hours of the new congress? Remember the incredible shrinking scope of the bill, which I covered here?

Well, it turns out the president will veto the bill, saying that direct aid and grants are a better solution. Of course, the White House offers no specific plan or near-term funding for more "direct aid."

It's a bit like their love of Hydrogen and fuel cell vehicles. They believe in long term solutions, preferably those that take 20 years for someone else -- the beloved "Private Sector" -- to build.

Monday, January 15, 2007

A Different Kind of Children's Fund

For a little comic relief, check out this british youtube gem.

Have a laugh, then consider this: Are we a bunch of whiners? Should we be thankful for the opportunities we've had, debt and all? Or is the debt burden a real contributor to income inequality forevermore? I am able to see both sides of this. Does anyone want to sway me in their direction?

Saturday, January 13, 2007

It's The Price, Stupid

Innaresting post over at "American Thinker." The problem with college is that costs continue to rise. All the student loan subsidies in the world will only encourage that to continue (just like the effect of health insurance on healthcare costs).

This article says tenure is one of the problems. If you have to keep a boatload of professors around while still attracting the best new ones....well, that could get expensive. Colleges have been passing this on to John Q Student quite successfully. But lazy monopoly practices can't last forever. England recently did away with academic tenure altogether (they got rid of slavery before we did too, but that's neither here nor there).

What would happen if undergraduate education were made free for everyone? Let's say a 4 year education costs $100,000 per person. That's a lot less than universal healthcare would cost. It's a one time per-citizen expense. And you might keep people out of hospitals, since studies show college educated people can afford better health care and smoke less, etc. Don't know if I believe that one, but I won't let a lack of data stifle my policy theories.

P.S. Aren't you proud of me? I didn't even mention the half trillion we've blown on a recent foreign entanglement.

Thursday, January 11, 2007

Stem Cells? Yes and No

Yawn. Just keeping the Naked Debt patent pending 100 hours checklist alive.

Congress passed stem cell legislation today.
The president said he would veto it. Again.
Congress doesn't have the votes to override. Again.

This is pure political theatre. If you want to sidestep the government and donate to stem cell research yourself, go here.

Tuesday, January 9 - Implement the 9/11 Commission Recommendations

Wednesday, January 10 - Increase the Minimum Wage

Thursday, January 11 - Expand Stem Cell Research

Friday, January 12 - Allow Negotiation for Lower Prescription Drug Costs

Wednesday, January 17 - Cut Interest Rates on Student Loans

Thursday, January 18 - End Subsidies for Big Oil and Invest in Renewable Energy

At Last the Disappointing Details

Thanks to the Project on Student Debt for the heavy lifting. They analyzed the incredible shrinking Student Loan Bill to see just what the impact would be. Enjoy the footnotes on how it affects me personally (or, more specifically, how it doesn't transport me to a more agreeable level of student loan hell. Not one bit. But I'm not bitter. Enjoy, you snivelling undergrads!).

The highlights:

  • The rate cuts only apply to Federal Stafford Loans. If your family also needs private loans, you're out of luck. 1

  • The rate cuts get phased in over 5 years. So after congress finally enacts it (remember, the senate has to chime in, and W needs to pen the thing), students have to wait 5 more years for any rates to actually cut in half.

  • The rate cut only applies to new loans. If, say, you took out loans one day before the bill is enacted, you are out of luck. 2

  • The bill only applies to undergraduate loans. If you take out grad school loans, you are out of luck (don't go and get too educated, now!) 3

  • An Example: if you take out a $20,000 loan and pay it over 10 years, your monthly payment will decrease by about 30 bucks, saving you about $4000 over the life of this loan. 4


Download the full pdf here.

1. I needed both private and federal loans to cover my Gucci institution. It seemed like a good idea at the time.

2. I've already graduated (twice) and consolidated (twice). Forget the fact that I don't get any help from this bill. I have to say, this is just dumb. Imagine the effect on the economy if you reduced interest rates for people who were working, paying taxes, and suddenly had more money to pour into the ipod econoshpere! Sorry, I know it is asking too much of congress to accomplish two things simultaneously.

3. Ok, I got an expensive Master of Fine Arts degree, which makes me dumber than congress. But what about people who went to medical school? law school? public health? social work? You should have known better too.

4. It's very easy to put that $30 per month into a 401k or retirement account, making the $4000 grow. You don't need it for rent or anything.

I'll stop whining now. At least I used small fonts.

Wednesday, January 10, 2007

100 Hours = World of Stagecraft

Is it me or does this feel like a political convention? You know, when you know the outcome in advance but watch anyway?

It is hardly breaking news that the dems passed the minimum wage bill today. Generally a good thing, but like everything else, it's not that simple. Small businesses may cut back hours, people may suddenly make too much money to qualify for government assistance. But okay. On principle, people shouldn't make 2.50 an hour in the richest country in the world. It ain't right. And that's the soundbyte the dems get today.

And Pelosi's second choice for the number 2, Steny Hoyer, is sounding a lot like a politician close to Naked Debt's heart (one that only lied about "sexy time," not geopolitics, national intelligence and orwellian invasions of our so-called privacy).

"You should not be relegated to poverty if you work hard and play by the rules."


Yawn. Amen. Yawn.

Sorry. No suspense just yet.

But as you watch the President upstage this week's forgone legislative conclusions, keep this in mind:

The Dems won't cut off funding for the surge. How will they fund our interest rate cuts? They'll let the Senate deliver the bad news, of course. But let's hope they surprise us.

Behold: your patent pending Naked Debt 100 hours checklist!

Tuesday, January 9 - Implement the 9/11 Commission Recommendations

Wednesday, January 10 - Increase the Minimum Wage

Thursday, January 11 - Expand Stem Cell Research

Friday, January 12 - Allow Negotiation for Lower Prescription Drug Costs

Wednesday, January 17 - Cut Interest Rates on Student Loans

Thursday, January 18 - End Subsidies for Big Oil and Invest in Renewable Energy

Tuesday, January 9, 2007

One Down, 5 to go

Day 1 of the first 100 hours is over, and the Dems managed to pass some of the 9/11 commission recommendations. Only four more days before our interest rates go down. But let's preview the 9/11 bill and see if it needed to be watered down to signify nothing.

What they wanted:

All of the 9/11 recommendations.

What they passed:

Half of them.

Oh well. They must have been going for the easy wins, which is what the first 100 hours theme is all about. When you start a job, you need to have quick successes to establish credibility.

On to the minimum wage!

Tuesday, January 9 - Implement the 9/11 Commission Recommendations

Wednesday, January 10 - Increase the Minimum Wage

Thursday, January 11 - Expand Stem Cell Research

Friday, January 12 - Allow Negotiation for Lower Prescription Drug Costs

Wednesday, January 17 - Cut Interest Rates on Student Loans

Thursday, January 18 - End Subsidies for Big Oil and Invest in Renewable Energy

Countdown to hour 83.3333333333333333333333333

Here it is folks, the schedule for the Democrats' first 100 hours in congress. You may want to note a little item scheduled for January 17th. Will they really do it? Who will the bill affect? If we just refinanced, are we out of luck?

Stay tuned to naked debt for answers. We have a little over a week to figure it out!

Tuesday, January 9 - Implement the 9/11 Commission Recommendations

Wednesday, January 10 - Increase the Minimum Wage

Thursday, January 11 - Expand Stem Cell Research

Friday, January 12 - Allow Negotiation for Lower Prescription Drug Costs

Wednesday, January 17 - Cut Interest Rates on Student Loans

Thursday, January 18 - End Subsidies for Big Oil and Invest in Renewable Energy

Monday, January 8, 2007

Student Loan Hell Quote of the week

It's not like we had a great national debate about whether we wanted to impose huge debts on young people. We just woke up one morning and it had happened.


Pat Callan
President,
National Center on Public Policy and Higher Education

4500 Problems

If congress passes student loan relief, cutting student loan interest rates in half, average savings over the life of most loans would be around $4500.

This according USPIRG.

Well that's pretty low. I'd like to meet the average voter to tell him the lukewarm news.

Wednesday, January 3, 2007

Net Neutrality

Not exactly education debt related, but very relevant to the little known lobbying that will make us wake up to a slightly different world. Sound familiar?


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