President Obama Is Looking To Extend The School Year

Jury is still out on Obama at this point. But he is the most recent in a long list of "change" candidates I have seen over 3 decades of voting. And if he is truly a change candidiate (in more ways that just fringe areas that really do not matter), he will be the first I have seen.

One other reason why problems do not get addressed is that the solution is often times something we do not want to hear. Voters would rather hear the Fantasy Island approach of "Everything is fine" than the truth. Speak the truth and you are sure to lose. Social security is a great example of that. We know there is a problem. We have known there is a problem for a long time. But no one wants to do anything about it. And the longer we wait, the more expensive/tougher the solutions get. Saw an article today indicating that the average kid born in the US in 2007 may live to 100 years old. Yeah, social security will be fine as it is' nothing to worry about. ;)

Which jury would that be, exactly?

GoBucks89 said:
And if he is truly a change candidiate (in more ways that just fringe areas that really do not matter), he will be the first I have seen.

Ah, but see, that's the trick. Who decides what areas are fringe and do not matter? That's an opinion that each individual makes. And that's how the debate stays alive indefinitely.

I agree with Carrie. I don't think Obama has been bought, and I haven't seen any reason to believe that his intentions aren't right (regardless of whether or not he has the right solutions).

I take issue with anyone who says "government can't" as some kind of absolute. As with anything else, there's a vast continuum between can and can't, as well as should and shouldn't. The problem I have with some of the Ron Paul type folk is their dogmatic insistence that there's a one of the other choice to make, and the world just ain't that simple.

My daughter (turns 12 next month) apparently talked about the suggestion of a longer school day in social studies today.

Paraphrasing:

She (her class? her peers?) seems to believe that it's not the length of the day, but rather the individual student. If a kid wants to learn a lot they can now and all the kids who do well and test highly are proof that the system works if you (the student) want to learn and do well.

Just thought it'd be interesting to share what these kids (or at least mine) think. There's the 12 year old's perspective.

GoBucks89 said:
Saw an article today indicating that the average kid born in the US in 2007 may live to 100 years old. Yeah, social security will be fine as it is' nothing to worry about. ;)

Clearly the problem is that we live too long for the system to continue to work as it has. Leave health care alone and it solves the social security problem too. ;)

mamoosh -- Obama is less than a year into a 4 year term. He, like hundreds of other candidates before him, campaigned on change. Its too soon at this point to be able to same whether he will deliver on that promise. Thus, the jury is still out....

carrie -- That is true. But it seems to me that we can agree on what the bigs things are. I would put the debt/deficits, social security, education, medicare, 2 wars and healthcare (Obama put healthcare on the list) on the list of big things. Lets see what changes he gets through with respect to those issues. And to date, what major thing has he changed from your perspective.

jeff -- Even assuming Obama hasn't been bought, there are 535 folks at the other end of PA Ave who have been. And to get anything done in the game of politics, you need to make deals with the folks who have been bought. Good luck.

And I agree that there are some things the government can do and some issues with which it can help. But to me, at this point we have way to many people looking to government (or at least someone else) to solve their problems. And the wars on poverty and drugs do not inspire a lot of confidence in me with respect to government solutions (either entire or partial) for a lot of problems.

Lord Gonchar said:

GoBucks89 said:
Saw an article today indicating that the average kid born in the US in 2007 may live to 100 years old. Yeah, social security will be fine as it is' nothing to worry about. ;)

Clearly the problem is that we live too long for the system to continue to work as it has. Leave health care alone and it solves the social security problem too. ;)

Social security gets fun when it permanently starts paying out more in benefits than it collects in tax revenues in 2016 (though the CBO this week indicated that will be the case on a temporary basis for 2010 and 2011 because of early retirements with buyout acceptors and reduced social security tax revenues). Don't think there is anything that we can do with respect to healthcare and life expectancies in that time frame unless reform involves cloning Dr. Kevorkian. ;)

Sounds like your daughter is pretty bright and perceptive.

Jeff said:
As with anything else, there's a vast continuum between can and can't, as well as should and shouldn't. The problem I have with some of the Ron Paul type folk is their dogmatic insistence that there's a one of the other choice to make, and the world just ain't that simple.

But a "black-and-white world" is much easier for the truly simple-minded to understand. And yes, there are benefits to not having a busy brain. But there are some serious drawbacks as well. I tend to think the latter outweigh the former by a considerable margin.

You'll never have ALL the facts relevant to any important decision. The real trick is in knowing when you have enough facts to make the best decision in the circumstances, and then being able to implement those decisions even when they are unpopular with people who hold a LOT of (undue?) influence...

GoBucks89 said:
And to date, what major thing has he changed from your perspective.

Well, this was pretty major according to my perspective. Especially given the stranglehold the banks had on the industry until now.

GoBucks89 said: And to date, what major thing has he changed from your perspective.

I'd say this country's reputation and good standing in the world has come a long way to being restored. Dubya sure did the country a lot of disservice in that respect. We have a ways to go still.*

(*The French will always hate Americans - except Jerry Lewis)

I don't know, I think it's pretty simplistic to think that based only on who we elect president, the rest of the world either hates or loves America and Americans. That really changes every 4 or 8 years? I will agree that we have a ways to go, as evidenced by the fact the Chicago was the first eliminated from the Olympic tribal circle today.

On the Jesus thing, there's no picketing in the streets because all the action has moved to the courtrooms.

And on the health care reform issue, my frustration is that while there is no clue what the plan will contain, we're being told what it certainly doesn't contain-- which coincidentally happens to be anything that people are concerned about, even though there is no official "plan" on record.

Not sure I would view abolishing FFEL as a major change. Though that is probably in the eyes of the beholder. But the real change happened in early 2008 when the feds had to pass an emergency measure to keep the student loan programs solvent (Ensuring Continued Access to Student Loans Act -- May 2008). The federal government agreed to buy student loans from lenders to provide capital to such lenders when the credit market crunch started in late 2007/early 2008 blocking capital access to student loan lenders. Effectively, the federal government was agreeing to make direct student loans at that point though on a temporary basis. Credit markets have not yet stabilized at this point so Congress effectively made the change permanent by abolishing the FFEL and making direct student loans. Linked article indicates that the student loan lenders countered with their own proposal that the CBO estimates would save $74 billion over 10 years (compared with the Obama plan which will save $87 billion). Article also notes that much of those savings are not from removing middleman but because the government has a lower cost of funds. Using that reasoning, we could all save money on our mortgages if the government made direct loans to us so we can buy homes.

Seems to me that its a little early to reach any conclusions about our reputation in the world. Certainly W didn't help (I am not a supporter of W). But lets see how the world reacts the next time that we propose to take action with which other countries do not agree. During the cold war, much of the world let us do what we wanted because they supported us against the evil Russians. That they didn't object didn't mean that they agreed with us only that they wanted our support. Remove the Russians from the equation and the analysis changes. Countries have more freedom to take positions that support their own best interests even if its against us (France, Germany and Russia were against the Iraq war because they had significant economic investments in Iraq -- which is fine). And I think that other countries have warmed to the idea as we move farther from the cold war to keeping the only super power in check now and again. During the cold war, there was some comfort with the two super powers keeping each other in check. And I expect to see continued changes as the century moves forward.

Seems to me that we do not see Jesus protests in the streets because (1) 80% of the country views itself as christian and (2) its pretty rare that kids are indoctrinated into christianity outside of christian homes, churches and schools (so the indoctrination is happening by or at the direction/request of the kids' parents). So whats to protest? :)

GoBucks89 said:
Effectively, the federal government was agreeing to make direct student loans at that point though on a temporary basis.

Not even close. How do you figure?

Don't forget the government has always been the ultimate holder of the loans via the guarantee. That's what made FFELP such a low risk opportunity for lenders to make money. That they provided a crutch for FFELP lenders to continue in the program during hard market times hardly constitutes a form of Direct Lending. That just demonstrates one more time that some of the bailout spending began prior to Obama's administration. :)

Credit markets have not yet stabilized at this point so Congress effectively made the change permanent by abolishing the FFEL and making direct student loans.

That largely oversimplifies the debate over FFELP and Direct Lending that has been going on for many, many years. It wasn't an "oh, the credit market sucks, so we'll go this direction now" kind of decision.

Linked article indicates that the student loan lenders countered with their own proposal that the CBO estimates would save $74 billion over 10 years (compared with the Obama plan which will save $87 billion).

Are you suggesting that a $13 billion difference is insignificant?

Article also notes that much of those savings are not from removing middleman but because the government has a lower cost of funds. Using that reasoning, we could all save money on our mortgages if the government made direct loans to us so we can buy homes.

That all depends on who you believe. The lenders were making money on FFELP at little risk to them. They wouldn't have participated if they weren't making money. They also wouldn't have fought so hard to keep the program alive if they weren't making money. They made money even when a student defaulted. Where do you suppose the money they used to make will go now?

Have you worked in the industry of higher education finance? I'm just curious about where your perspective stems from. And you are right, debating the significance of this issue is meritless. But you asked about my perspective and I gave it to you. Telling me I'm likely wrong about it afterward, makes me shake my head. :)

I suspect the truth about the student loan program is that switching to direct Federal loans basically got the banks out of a business that they probably didn't want to be in.

Back when I was in college (1988-1992) the Stafford loan program offered student loans that were an 8% interest rate until one year after graduation, then 10% thereafter. During the 8% period, the interest was paid by the Federal government, and the loan was guaranteed by the Federal government until I paid it off. Well, in 1990, an 8%/10% loan was quite a deal. When I bought my house in 1997, the 8.125% interest rate looked pretty good even though it was only guaranteed for five years.

Well, today that same mortgage has adjusted to a 3.25% interest rate, and that is far from the lowest available rate. No one in his right mind would take out a student loan at 8%, much less 10% today. Today, student loans are a nuisance of Federal regulation for which there is very little reward. What used to be a fairly lucrative business, protected by the Federal government, has been turned by the market into a low-return nuisance.

(I suspect that many years of ridiculously low mortgage interest rates are also part of the reason for the real estate meltdown: banks figured out that they could make more money originating loans than servicing them, so they offered anything to anybody just to collect the fees......)

--Dave Althoff, Jr.

Banks have been fighting tooth and nail to keep FFELP alive. Again, because they've been making low risk money on it for a long time. The interest rates only dipped for a short period before legislation was passed (again at the urging of the banking industry) to fix the rates at 6.8%. Students didn't have a choice or benefit of the variable market. The banks won again.

They didn't start to suffer until the market tanked so bad they stopped being able to generate the capital to offer new loans (as is referenced above.) But even then, the government (not under Obama mind you) bailed them out and gave them the means to continue. The banks won again.

The students are the ones who keep losing. And even though one will say (as the article does) that the rates will be the same under the Direct Student Loan program, that's only because the rates had to be the same when the legislation was passed that protected the banks' interest. You couldn't offer different Stafford loan rates for Direct and FFELP.

Those rates are subject to change when the next reauthorization comes around and this time there won't be a heavy lobby involved to push the terms. It will be interesting to see how things play out.

Mamoosh said:

GoBucks89 said: And to date, what major thing has he changed from your perspective.

I'd say this country's reputation and good standing in the world has come a long way to being restored. Dubya sure did the country a lot of disservice in that respect. We have a ways to go still.*

(*The French will always hate Americans - except Jerry Lewis)

Going around the world apologizing to the world does nothing to help us. Our standing in the world hasn't changed for the better. Are France and Germany sending more troops to Afganistan? Nope.

Obama is weak on foriegn policy and is not making us safer. He is very indesisive about Afganistan making the situation worse and making us look weak. He makes comments like this "No balance of power among nations will hold. The traditional divisions between nations of the South and the North make no sense in an interconnected world; nor do alignments of nations rooted in the cleavages of a long-gone Cold War." What do our NATO allies, Japan, South Korea, and Taiwan think about this? He eliminated the missisle sheild in Poland to appease Russia and got nothing in return. All of this in less than a year. I can't wait for the next three.

Under the existing loan guarantees, the lenders need to wait to collect on the loans. The federal guarantee kicks in if the student doesn't pay. But the guarantee doesn't permit the lender to make new loans. Lenders need to raise capital in order to do that. The capital markets were pretty much dead in late 2007/early 2008. There was concern that student loan lenders would not have the ability to make new student loans because they did not have access to capital. And if that happened, students would lose out because students would have no access to loans (presumably dropping out of school). So the feds stepped in and started buying student loans thus providing capital to lenders to make new loans. A lender that has made $10 million in student loans but that has no further capital cannot make new student loans. If the federal government agrees to buy the existing loans for $10 million and the lender uses the proceeds of that sale to make $10 million in new student loans, I think the feds are effectively making direct loans at that point. What would you call it?

As I noted earlier I think the world would be a better place if all of them and all of the supporters were banned to a distant planet. So I don't really care when the bailouts started. :)

I never said that there wasn't am ongoing debate about the government making direct loans. But I think its naive to say that the current credit crunch didn't play a huge role in the bill passed by Congress. As noted above, by buying student loans from lenders, the government is essentially making student loans directly already. At this point, there is no certainty as to when the credit markets will again be back. So there is uncertainty as to how long the feds will need to prop up the student loan market. So why not just end the program and make the loans directly now because you will effectively be making direct loans for some period of time in any event.

I never said $13 billion is insignificant. Though it is over 10 years so $1.3 billion/year is certainly less significant. And with a government that is forecasting $1 trillion deficits over at least the next couple of years, I think something that is less than 0.2% of that is even less significant. One of the things that the government spending spree over the past 18 months or so is taken the sticker shock out of a billion.

Yes, student loan lenders were making money. Thats what for profit entities do. And yes, for profit entities fight hard to keep making money. Particularly if you are a lender in the current credit market. What is wrong with that? Its my understanding that the government will pump the savings into more government programs. Though the government will incur more costs as a direct lender than it does as a guarantor. Are there other private industries that the government should take over so they can use the profits for more government programs? :)

Yes I do have experience with the industry. I work in commercial finance. I have worked on large student loan securitizations and student loan programs for various lenders. And I asked what major thing Obama had changed from your perspective. I noted that I did not agree that it was major but also noted that would be a matter of opinion. The rest of what I posted to just looking at the cause behind the change. The sun is going to come up this morning and I am sure there is some politician somewhere who will try to take credit for it. Doesn't mean they caused it though. :)

Rideman -- Charging a higher interest rate doesn't necessarily mean that you are making more profits. You would need to look at the lender's cost of funds. It may be the case that the lender is making more money on the lower interest rate loan. And we could go into the myriad of causes of the real estate meltdown but that would be a separate thread and not one that would probably belong on a coaster message board. Though its not exactly like where this one headed belongs on one either. :)

GoBucks89 said:
I think the feds are effectively making direct loans at that point. What would you call it?

As I said before, I call it a bailout. They weren't providing loans directly to students. They were enabling the lenders to do so and making it possible for the lenders to continue in the program as it were. Essentially, they were calling in the guarantee early and without cause from the student.

At this point, there is no certainty as to when the credit markets will again be back. So there is uncertainty as to how long the feds will need to prop up the student loan market. So why not just end the program and make the loans directly now because you will effectively be making direct loans for some period of time in any event.

I would agree that the credit market helped sway the scales. Fair enough. But I do not believe the credit market made the change inevitable and therefore, not political. The banks, who know the market will bounce back again, have lobbied hard to keep this program in tact. The decision to end it was a political one.

Yes, student loan lenders were making money. Thats what for profit entities do. And yes, for profit entities fight hard to keep making money. Particularly if you are a lender in the current credit market. What is wrong with that?

Oooh, that's a bit of a misdirection and an entirely different discussion. I never said it was wrong for banks to make money. Just addressing Dave's assertion that the bank's had little interest in FFELP.

After all, this discussion began when you made the assertion that all administrations to date have been driven by money and the power that comes with it...therefore, making them susceptible to the persuasion of lobbyists. That's why I offered this as an example where the heavy persuasion of the banking industry was ignored for the pursuit of a different option.

Its my understanding that the government will pump the savings into more government programs. Though the government will incur more costs as a direct lender than it does as a guarantor.

It may cost the governement more to serve in the new role, but there will be a net gain that will get turned back to the program to help more students.

Are there other private industries that the government should take over so they can use the profits for more government programs? :)

Potentially. If those private industries are in the business of serving government programs as this one was. :)

But for the record, I want to offer that I don't think FFELP is dead forever. I just think the banking industry needed the reality check to let them know they are not the only option available.

But neither program is great and are full of their problems. Direct lending will get a shot and at some point it will be determined that the schools can't handle the administration and/or there are better options. It's the ebb and flow of things.

The sun is going to come up this morning and I am sure there is some politician somewhere who will try to take credit for it. Doesn't mean they caused it though. :)

And for every positive thing the government does, there will likely be some opposer somewhere who will claim it was coincidental and lucky. Doesn't mean they are right. :)

Which speech had the "I'm sorry" statements, exactly?