Reply to: Student loan overhall

[Zero Liability]

In some cases, yes. Some of the sales practices bordered on fraudulent. Especially where the single premium, front loaded policies attached to loans were concerned (although it consumer debt addiction in this country is also partly to blame.) Student loans were one of the products the banks didn't really latch it onto but the ones sold here are a different beast to those in the US. I agree though, the product isn't bad in and of itself, it was simply mis-sold, which unfortunately has wrecked its reputation. Elsewhere in Europe it is not unusual for lenders to recommend taking out life insurance and/or critical illness/accident policies with larger loans.

[SueEllen]

Had the banks sold something like PPI on student loans, they'd be blamed for that too. In the end, the bank can recommend what is common sense, and some do. It reduces their own risk too. However, the bailout culture here and in the US and now the Eurozone does not lend itself (no pun intended) to sensible risk management. Regular premium PPI policies probably would be beneficial on student loans but that's for the consumer to determine, and I have no doubt many would turn it down. A lot of the repayment risk resides with the lender.

The problem with the PPI they were selling is how they were selling it. They were selling it to people who could NEVER claim on the terms that were given, plus forcing people to take it out as a condition of getting a loan/credit card.

[Zero Liability]

Had the banks sold something like PPI on student loans, they'd be blamed for that too. In the end, the bank can recommend what is common sense, and some do. It reduces their own risk too. However, the bailout culture here and in the US and now the Eurozone does not lend itself (no pun intended) to sensible risk management. Regular premium PPI policies probably would be beneficial on student loans but that's for the consumer to determine, and I have no doubt many would turn it down. A lot of the repayment risk resides with the lender.

[Mich the Tester]

Protecting against the unexpected is what insurance is for. You're basically saying the banks should act as an insurer and bail out any debtors who find themselves in a situation they couldn't have predicted. But that would only make banks lend less and charge more, and take away the choice from the borrower. I've had a couple of personal loans and never bothered with PPI as I considered it a rip off - my choice.



Free house? I'll have one. Where do I buy?

Ah but they aren't free; they still have a 'price' even though their value is almost nowt and they can hardly be sold.

[VectraMan]

...and this is the crux of why our lending system is basically broken. The lender judges risk according to today's situation and projections of the situation in the future based on what's happened in the past, as opposed to building a more robust approach that shares risk and recognises that every day things can happen that have never happened before and are beyond the control of the borrower or the lender (sometimes called Black Swans).

Protecting against the unexpected is what insurance is for. You're basically saying the banks should act as an insurer and bail out any debtors who find themselves in a situation they couldn't have predicted. But that would only make banks lend less and charge more, and take away the choice from the borrower. I've had a couple of personal loans and never bothered with PPI as I considered it a rip off - my choice.

Sure, the guy has a house and that's an asset, but we've all seen how a house can lose value; some houses in a village here in Brabant, NL, which were worth > 200k when the mortages were taken out are now essentially valueless because Philip Morris closed their factory and nobody's going to buy a house in a place that only really existed to serve that factory.

Free house? I'll have one. Where do I buy?

[Mich the Tester]

Aye, at that point he didn't have 3 dependents to raise.

...and this is the crux of why our lending system is basically broken. The lender judges risk according to today's situation and projections of the situation in the future based on what's happened in the past, as opposed to building a more robust approach that shares risk and recognises that every day things can happen that have never happened before and are beyond the control of the borrower or the lender (sometimes called Black Swans). Sure, the guy has a house and that's an asset, but we've all seen how a house can lose value; some houses in a village here in Brabant, NL, which were worth > 200k when the mortages were taken out are now essentially valueless because Philip Morris closed their factory and nobody's going to buy a house in a place that only really existed to serve that factory.

[mudskipper]

We don't know that there's no insurance on the co-signer. And maybe he has enough assets to cover the debt (i.e. a house), which is why the bank agreed to him as a co-signer. Either way he willingly co-signed a loan without considering the consequences if the other person couldn't pay (which could be for a number of reasons much more likely than death). Sad story, but reading the article three of the four banks have reduced the debt and reduced the rate to 0% - far more than they're obligated to do. I'm not sure this is a "kick the banks" story.

But I wonder why she couldn't get a federal loan? I'd bet there's a bit more to this story than we know.

My student loan was £820. Quite terrifying how much debt today's students get into; I'm not sure I'd go to university faced with the same.

Aye, at that point he didn't have 3 dependents to raise.

[Mich the Tester]

I'm not sure I'd go to university faced with the same.

I'm almost sure I wouldn't. I'd go through the 'unschooling' route personally.

[VectraMan]

Only to a point; I can't see this as responsible if there's no insurance on the lives of both co-signer and borrower.

We don't know that there's no insurance on the co-signer. And maybe he has enough assets to cover the debt (i.e. a house), which is why the bank agreed to him as a co-signer. Either way he willingly co-signed a loan without considering the consequences if the other person couldn't pay (which could be for a number of reasons much more likely than death). Sad story, but reading the article three of the four banks have reduced the debt and reduced the rate to 0% - far more than they're obligated to do. I'm not sure this is a "kick the banks" story.

But I wonder why she couldn't get a federal loan? I'd bet there's a bit more to this story than we know.

My student loan was £820. Quite terrifying how much debt today's students get into; I'm not sure I'd go to university faced with the same.

[Mich the Tester]

As Sue Ellen said, the borrower and/or co-signer can go bankrupt or die, so the bank is taking a risk. The only reason she'd need a co-signer at all is because the bank considered her too high a risk; perhaps her education was in something unlikely to result in a high salary. In that context, insisting on a co-signer is lending responsibly, and recovering money owed is acting responsibly to ensure the bank survives and doesn't need another taxpayer bail out. Otherwise co-signing means nothing and she'd have never been able to get the loan for an education in the first place.

Only to a point; I can't see this as responsible if there's no insurance on the lives of both co-signer and borrower.

[VectraMan]

No, I'm basically challenging the assumption that in a loan the borrower should bear all the risk when something goes wrong; I rather like the Islamic banking principle (yes there are good things in Islam) where lender and borrower share responsibility for the loan and share the benefits from what the loan is used to achieve and the risk that something goes wrong, as opposed to this 'banker takes all' approach we currently have in the west. Even under our system, the bank could have advised this chap that he should insure his daughter's life. Alternatively if he'd taken out a federal loan it would have been cancelled at her death. The current approach is pretty ugly, and we've spent the last 6 years seeing the results of a banking system that places all risk with the borrower (or the taxpayer as the case may be), leaving banks free to make irresponsible loans or loans that are sensitive to changing circumstances and we'll spend the rest of our lives paying for the mess it's created.

As Sue Ellen said, the borrower and/or co-signer can go bankrupt or die, so the bank is taking a risk. The only reason she'd need a co-signer at all is because the bank considered her too high a risk; perhaps her education was in something unlikely to result in a high salary. In that context, insisting on a co-signer is lending responsibly, and recovering money owed is acting responsibly to ensure the bank survives and doesn't need another taxpayer bail out. Otherwise co-signing means nothing and she'd have never been able to get the loan for an education in the first place.

[SueEllen]

No, I'm basically challenging the assumption that in a loan the borrower should bear all the risk when something goes wrong; I rather like the Islamic banking principle (yes there are good things in Islam) where lender and borrower share responsibility for the loan and share the benefits from what the loan is used to achieve and the risk that something goes wrong, as opposed to this 'banker takes all' approach we currently have in the west. Even under our system, the bank could have advised this chap that he should insure his daughter's life.

They would have been told to insure each other's life in the UK and it would have been written so that the loan company can help itself to the deceases estate.....

[Mich the Tester]

So loan companies shouldn't recover the money they're owed? You're basically arguing that a contract entered into voluntarily is worth nothing, and that's a pretty dangerous precedent to set. Nobody would be able to get a loan ever again.

No, I'm basically challenging the assumption that in a loan the borrower should bear all the risk when something goes wrong; I rather like the Islamic banking principle (yes there are good things in Islam) where lender and borrower share responsibility for the loan and share the benefits from what the loan is used to achieve and the risk that something goes wrong, as opposed to this 'banker takes all' approach we currently have in the west. Even under our system, the bank could have advised this chap that he should insure his daughter's life. Alternatively if he'd taken out a federal loan it would have been cancelled at her death. The current approach is pretty ugly, and we've spent the last 6 years seeing the results of a banking system that places all risk with the borrower (or the taxpayer as the case may be), leaving banks free to make irresponsible loans or loans that are sensitive to changing circumstances and we'll spend the rest of our lives paying for the mess it's created.

[quackhandle]

This thead made me wonder where our "friend" Ed Lester ran off to.

Ah here he is.

qh

[quackhandle]

The student loans company have a 283 column table where they store pretty much every detail about a student's loan.

To fix the obvious performance issues you might expect with that they decided upon that adding a new column and populating it with nulls as they thought that would speed up the oracle database. I tulip you not.

But then again it's the goverment/public sector I should not really be surprised.

qh